February Trade Balance

The trade balance widened in February according to the Bureau of Economic Analysis. The downtick came as exports dropped by 1.1 percent in the period. This $2.0 billion slowdown in exports was exaggerated by the $1.0 billion uptick in imports. The total trade deficit was $42.3 billion versus January’s shortfall of $39.3 billion.

This indicator comes out with considerable lag, so this data is not terribly actionable, but it does provide an important description of the economy. One interesting narrative in this release is the change happening with America’s trade shortfall versus China. This $20.9 billion deficit is the smallest since March 2013. Both components of trade are improving in America’s favor on a year-over-year basis. Exports to China have grown by 6.2 percent in the last twelve months. Meanwhile, imports from China fell 6.0 percent in the same period. This pattern certainly resonates with the slowing GDP data being released from China.

Our nation’s trade balance has shown a distinct trend since January 2012. The gap has been closing since that time. The current setback is only concerning because the smallest deficit since that time occurred in June 2013 and has not been as small since. To continue the improving drift, the gap will need to shrink to less than $34.4 billion before it widens beyond $43.4 billion. (by C. Cox)