Mon, 10 May 2021

WASHINGTON D.C.: As the economic activity in the United States recovers faster than that of its rivals, the nation's trade deficit saw a 4.8 percent jump to reach a record high of $71.1 billion in February, the Commerce Department reported last week.

The expansive COVID-19 vaccination drive and the White House's $1.9 trillion pandemic rescue package, a portion of which is being satiated with imports, are expected to continue boosting domestic demand and driving growth this year.

President Joe Biden has proposed a $2 trillion infrastructure plan, likely to bring in even more imports and boost economic growth.

"The deficit could remain wide this year and next because of the fiscal stimulus and potential infrastructure package that could pass in the second half of this year," said Ryan Sweet, a senior economist at Moody's Analytics in West Chester, Pennsylvania, as quoted by Reuters. "As the economy continues to strengthen, this will keep the deficit wide."

Exports dropped 2.6 percent to $187.3 billion. The exports of goods tumbled 3.5 percent to $131.1 billion, led by shipments of capital goods, which decreased $2.5 billion, likely affected by unexpected cold weather across the country.

Exports of consumer goods, motor vehicles, parts and engines, food and services, especially travel, declined.

Imports slipped 0.7 percent to $258.3 billion. Goods imports fell 0.9 percent to $219.1 billion, reflecting supply-chain constraints, rather than weak domestic demand, while those of motor vehicles, parts and engines and consumer goods also decreased. The reduction in trade flows in February was partly due to harsh weather, logistics and transportation problems at ports.

However, imports of capital goods hit a record high, boosted by civilian aircraft, medical equipment and electric equipment, among others, while those of industrial supplies and materials were the highest since October 2018, thanks to crude oil imports worth $1 billion. This resulted in the United States recording its first petroleum deficit since December 2019.

"With inventory at record lows and affordability increasingly stretched thanks to rapid house price gains, we expect home purchase demand will trend down this year," said Matthew Pointon, senior property economist at Capital Economics in New York.

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