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Tuesday, June 25, 2024
HomeNewsEconomyTrade Deficit Balloons In March, Indicating Economic Contraction In 1Q

Trade Deficit Balloons In March, Indicating Economic Contraction In 1Q

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U.S. trade deficit image depicting cargo ship at port. CREDIT: Reuters

A Commerce Department report Tuesday suggests the U.S. economy contracted in the 1Q, as the trade deficit ballooned to its highest level in over 6 years. In March, the trade deficit rose 43.1 percent to $51.4 billion, which is the largest since October 2008 and the biggest percent change rise since December 1996.

Further, February’s shortfall was revised up to $35.9 billion from an initially reported $35.4 billion. When adjusted for inflation, the deficit increased to $67.2 billion in March, the largest in eight years and up from $51.2 billion the prior month.

The report widely missed expectations, as economists polled by Reuters had forecast the trade deficit rising to $41.2 billion. Because March’s trade gap was far wider than the $45.2 billion deficit the government initially estimated when it released its snapshot of first-quarter gross domestic product (GDP) last week, the revisions all but ensure the economy contracted.

In that report, the government estimated that trade shaved off 1.25 percentage points from GDP, dragging economic growth down to an abysmal 0.2 percent annual pace. The economy reportedly expanded at a 2.2 percent rate in the fourth quarter.

By just how much growth will be revised down to show a contraction will not be known until the government publishes its second GDP estimate later this month.

In March, imports rebounded by 7.7 percent, the largest increase on record, to $239.2 billion. Labor disputes coming to an end in part fueled the import gain, but some of the imports likely ended up in inventories, which in the first quarter recorded their biggest increase since the third quarter of 2010.

Imports of food and capital and consumer goods, as well, were the highest ever on record, while imports of industrial supplies and materials were the lowest on record.

Imports of petroleum products also hit a record low, as lower crude oil prices and increased energy production in the United States reduced demand for foreign oil.

Meanwhile, exports gained 0.9 percent to $187.8 billion in March.

Still, exports of petroleum products were the lowest since February 2011. Exports to the European Union increased by 8.6 percent, with those to Germany reaching their highest level since October 2008.

However, the United States sold the fewest amount of goods and services to Brazil since April 2010. Exports to Canada and Mexico – the main U.S. trading partners – rose in March.

Exports to China jumped 13.6 percent, while imports increased by a far greater 31.6 percent. That left the politically sensitive U.S.-China trade deficit at $31.2 billion, up 38.6 percent from February.

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PPD Business, the economy-reporting arm of People's Pundit Daily, is "making sense of current events." We are a no-holds barred, news reporting pundit of, by, and for the people.

Latest comment

  • International finance’s Free trade
    Destroying US jobs, wages, standard of living, and families for 40 years.
    Crushing the US down into weakness and inevitable third world status.

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