U.S. goods trade deficit narrows; retail inventory accumulation slows

The U.S. trade deficit in goods narrowed in February after setting a record high in the prior month as exports rebounded, but any lift to economic growth this quarter could be offset by businesses slowing their pace of inventory accumulation.

The deficit fell 0.9% to $106.6 billion, the Commerce Department said on Monday. Exports increased 1.2% to $157.2 billion. The rebound in exports was led by a 6.3% surge in shipments of consumer goods.

Food exports accelerated 3.6%, while industrial supplies increased 2.6%. But motor vehicle exports dropped 3.4% as production continued to be hampered by a global semiconductor shortage. There were also substantial declines in exports of capital goods and other goods.

Imports of goods gained 0.3% to $263.7 billion. They were curbed by a 9.9% decline in imports of motor vehicles as well as a 3.0% drop in food imports. But there were strong increases in imports of industrial supplies and other goods.

Capital goods imports also rose as did consumer goods.

Trade has subtracted from gross domestic product growth for six straight quarters and could still remain a drag this quarter.

While businesses continued to replenish inventories in February, the pace was less frantic than in the last months of 2021. Wholesale stocks increased 2.1% after climbing 1.1% in January. Retail inventories rose 1.1% in February following a 1.9% advance in January.

Motor vehicle inventories gained 0.9% after surging 2.5% in January. Excluding motor vehicles, retail inventories increased 1.2% after accelerating 1.7% in January. This component goes into the calculation of GDP growth.

Inventory investment accelerated at a robust seasonally adjusted annualized rate of $171.2 billion in the fourth quarter, contributing 4.90 percentage points to the quarter’s 7.0% growth pace.

Despite February’s rise, inventories are likely to be neutral to GDP growth this quarter as they would need to increase at a similarly fast rate as the fourth quarter to contribute to growth. First-quarter GDP growth estimates are mostly below a 1.0% pace.

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