Trade Deficit Widens on Increased Oil Imports

The U.S. Census Bureau and the U.S. Bureau of Economic Analysis, through the Department of Commerce, announced Thursday that total January exports of $184.5 billion and imports of $228.9 billion resulted in a goods and services deficit of $44.4 billion, up from $38.1 billion in December, revised. Excluding petroleum, the trade shortfall was little changed at $20.1 billion, compared with $19.5 billion in December. In January, the goods deficit increased $5.7 billion from December to $61.8 billion, and the services surplus decreased $0.6 billion from December to $17.3 billion. The category of services includes things such as travel, entertainment and finance. Movie and music royalties and airfares are some of our exported services. Both exports and imports have held steady over the past two years, despite the problems in Europe. The monthly changes in trade have generally not been large, to a statistically significant degree. Exports of goods decreased $2.0 billion to $130.8 billion, and imports of goods increased $3.6 billion to $192.5 billion. Exports of services decreased $0.1 billion to $53.7 billion, and imports of services increased $0.5 billion to $36.4 billion. The goods and services deficit decreased $7.8 billion from January 2012 to January 2013. Exports were up $5.8 billion, or 3.3 percent, and imports were down $2.0 billion, or 0.9 percent. This is a positive for the U.S. economy, as a falling trade deficit is an addition to U.S. GDP. January imports were $4.1 billion more than December imports of $224.8 billion. This increase primarily reflects an increase in crude oil imports. Imports of more economically-sensitive products also increased, including drilling equipment, telecommunications equipment, computers and semiconductors. This means that U.S. companies might be investing a bit more in their plants and equipment, which may suggest that businesses here are forecasting an increase in economic activity. Still, these are not large categories of imports, though the increases were notable. However, a somewhat different picture emerges when looking at imports of consumer goods. We see decreases in imports for things ranging from televisions to clothing to cell phones. However, this does not necessarily mean that consumers are cutting back spending. Rather, it may mean that wholesalers and retailers believe their inventories are too high. Indeed, in the separate Institute for Supply Management Non-Manufacturing Survey, which covers service sector businesses including retailers and wholesalers, 27 percent of those surveyed reported inventories as “too high” while only two percent reported inventories as “too low.” Thus, a decrease in imports would correspond to this inventory sentiment. As to exports, as noted above, January exports decreased by $2.2 billion in January to reach $184.5 billion. Exports of goods decreased $2.0 billion to $130.8 billion, while exports of services decreased $0.1 billion to $53.7 billion. The U.S. exported more capital equipment, while exports of consumer goods held steady. Exports of industrial supplies, which include some commodities, dropped a bit. Data on exports by country show that, for the most part, exports to Europe have held steady – outside a drop in exports to the Netherlands and, to a lesser extent, Belgium and Italy. The drop in exports to these countries explains most of the decrease to $24.9 billion from 26.8 billion in exports of goods to Europe. (Note that these data are not seasonally adjusted.) Exports to Germany held steady at $3.8 billion. Exports to the Pacific Rim countries ranging from Australia to China, Japan and Hong Kong also decreased, by about $5 billion to $29.3 billion, which may reflect seasonal patterns. Our exports to China fell to $9.4 billion from $10.4 billion. By comparison, our imports from China increased to $37.2 billion from $34.8 billion. Again, these data are not seasonally adjusted; on a year over year basis, our trade deficit with China widened to $27.8 billion in January compared with $26 billion in the same month a year earlier.