Chart of the week
March’s traded goods data seem to indicate a further widening in the trade deficit. The goods deficit for the month reached a record level of $90.6 billion*.
Imports have accelerated recently, rising 7.5% in the last three months. Exports have been rising too, and almost as fast (+6.6%), but with the volume of imports 1.6 times greater than that of exports, the deficit has widened significantly.
OUR ANALYSIS
The overall US trade deficit, which includes the services balance, has deepened significantly over the past twelve months. While the gap had hovered around $45 billion for a decade, February’s number exceeded $70 billion and is heading towards a new record in March*.
Although the shale revolution has reduced imports of petroleum products, other imports have risen by as much. At 3.8% of GDP, the first-quarter deficit reached a level not seen since 2008*. The previous low point was at the end of 2005 when the gap stood at 5.9%.
First-quarter GDP data also indicate a negative impact from declines in inventories and we can expect imports to rise as inventories readjust. In addition, the trade deficit can be expected to widen further as imports receive a boost from greater US domestic demand driven by the economy reopening and significant stimulus, especially the direct government transfers to households. That said, the overall effect may be tempered by rising demand from Europe, as America’s main export destination reopens.
If the US trade deficit widens significantly, the impact of stimulus on growth could be hampered and the dollar may find itself under pressure.
The following opinion was written on April 30th 2021 and is susceptible of changing.
*Sources : Bloomberg and Lazard Frères Gestion, the April 30th 2021
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