HomeContributorsFundamental AnalysisU.S. Trade Deficit Widened in January

U.S. Trade Deficit Widened in January

The U.S. trade deficit widened to $48.5 billion in January from a $44.3 billion deficit in December. The trade deficit was right on the consensus expectation.

January exports rose for the second consecutive month (+0.3% month-on-month), driven higher by automotive exports (+10.8%) and industrial supplies (+5.8%). In real terms, exports rose 0.4%.

Imports rose 2.5% month-on-month in January owing to increases in the import of consumer goods ex autos (+4.9%), and capital goods (+1.3%). In real terms, imports of goods rose 2.1%, marking the fourth consecutive month of advance.

Key Implications

Another month, another unsurprising trade report. The pop in the U.S. dollar late last fall is likely a factor that has fed into the widening of the nominal trade deficit in January. Since U.S. dollar strength makes foreign goods cheaper for Americans, and is also a sign of a healthy economic expansion relative to other countries in the world, we expect to continue to see imports to rise in upcoming months.

The elevated level of the trade-weighted dollar along with firming of domestic demand is a major theme behind our view that net trade will likely exert a drag on U.S. economic growth this year. However, uncertainty about the future of U.S. trade policy makes this view less clear.

TD Bank Financial Group
TD Bank Financial Grouphttp://www.td.com/economics/
The information contained in this report has been prepared for the information of our customers by TD Bank Financial Group. The information has been drawn from sources believed to be reliable, but the accuracy or completeness of the information is not guaranteed, nor in providing it does TD Bank Financial Group assume any responsibility or liability.

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