- The U.S. trade deficit rose to $71.1 billion in February from $67.8 billion in January, as exports decreased more than imports. Total exports (goods and services) declined by 2.6% (+1.1% in January), while imports went down by 0.7% (+1.2% in January).
- Goods exports declined by 3.6% (+1.7% in January). Losses were across the board, with capital goods (-5.9%), consumer goods (-5.8%) and automotive vehicles (-5.6%) registering the largest declines. Accounting for price changes, real goods exports contracted by 5.3% in February.
- Goods imports dropped by 1.0% (compared to +1.6% in January). Most product categories declined, with automotive vehicles (-10.7%) and foods, feeds & beverages (-4.9%) seeing the biggest drops compared to January. Meanwhile, imports of other goods (10.8%) and industrial supplies (+8.2%) increased on the month. Excluding price changes, real imports went down by 2.0% in February.
- Meanwhile, exports of services contracted by 0.4% (+0.2% in January) for the month, while imports grew by 0.6% (-1.2% in January).
Key Implications
- Exports and imports of goods contracted as the post-holiday surge in cases took its toll on February data. Almost a year after the pandemic hit, exports still remain below levels seen last year, down 10.0% from February 2020. Meanwhile, imports are now 5.0% above year ago levels.
- Delving deeper into the data reveals the chronic pain being felt by the services sector. While goods exports are only 5% lower than year-ago levels, services exports are a staggering 19.6% lower. Similarly, goods imports are up 10.5% compared to a year ago, while services imports are down 17.4%. There is still a long and bumpy road ahead before services trade reaches pre-pandemic levels.
- Despite massive fiscal stimulus and accelerated vaccine roll-outs, we expect the stop-and-go trend in the trade recovery to continue. Cases are on the rise once again in the U.S. and its largest trading partners (especially the EU and Canada). It will take several months before restrictions are fully eased. Until then, the trade recovery (particularly services trade) will remain bumpy and uncertain.
