The US trade gap grew to its highest level in more than a year in March, as rising consumer demand and higher oil prices fuelled imports, official figures showed on Wednesday.
The trade deficit grew by 2.5 per cent to $40.4bn in March, according to the commerce department. That was in line with projections of Wall Street analysts and was the largest gap since December 2008.
America’s trade shortfall has grown by 40 per cent in the past year as trade volumes have accelerated and the global economy has emerged from its recession. In March, trade volumes rose to their highest levels since October 2008.
“Not all trade deficits are created equal—the underlying import and export flows matter as well,” said John Ryding and Conrad DeQuadros, economists at RDQ Economics. “This report speaks to the recovery in the both the US and overseas.”
The trade deficit has been edging higher since it bottomed last June at $27bn. Although this reflects renewed strength in the global economy and greater domestic demand in the US, the wider gap will provide less of a boost to gross domestic product.
Economists expect output to grow at an adjusted annual rate of 3.2 per cent in the second quarter. In the first quarter, resurgent consumer spending picked up the slack as the impact of trade and a cyclical boost from an inventory swing waned.
Exports outstripped imports in March, rising by 3.2 per cent to $147.9bn. The US exported more industrial supplies, consumer goods and food.
Imports climbed by 3.1 per cent to $188.3bn as Americans spent more on televisions, furniture, fruit juices and oil. Steven Ricchiuto, chief economist at Mizuho Securities, notes that when excluding petroleum imports, the US trade deficit fell by 1.1 per cent.
The cost of crude oil imports rose from $20.1bn in February to $23.7bn in March.
“With final demand on the mend and most businesses consequently looking to stabilise or modestly boost inventories, underlying demand for imports has picked up substantially,” said Joshua Shapiro, chief US economist at MFR. “At the same time, exports will continue to be supported at least for a while by better economic conditions abroad.”
Meanwhile, the US deficit with China, its biggest and most politically sensitive trading partner, expanded in March, growing from $16.5bn to $16.9bn. Trade deficits with the European Union, Japan and Mexico also widened, while the US gap with Canada narrowed.
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