U.S. trade deficit narrowed somewhat in January

Analysis by Chad Moutray, chief economist, National Association of Manufacturers 

The Bureau of Economic Analysis and the Census Bureau said that the U.S. trade deficit narrowed somewhat, down from $45.60 billion in December to $41.75 billion. December’s figure exceeded the average of $42.06 billion observed in 2014 as a whole, and it was the highest level of the year. For January, both goods exports (down from $134.22 billion to $128.71 billion) and goods imports (down from $199.23 billion to $190.33 billion) were lower, with the latter falling by more. The trade surplus in the service sector widened marginally, up from $19.42 billion to $19.87 billion.

Much of the reduction in goods exports and imports stemmed from petroleum, with lower crude oil prices reducing the nominal data points. Petroleum exports declined from $10.29 billion to $8.76 billion, with petroleum imports decreasing from $24.89 billion to $19.45 billion. In contrast, the non-petroleum trade deficit widened, up from $48.87 billion to $49.96 billion.

Indeed, goods exports were mostly lower. For instance, there were lower levels of goods exports in the following categories: industrial supplies and materials (down $2.2 billion), foods, feeds and beverages (down $1.08 billion), automotive vehicles and parts (down $950 million) and non-automotive capital goods (down $545 million). The bulk of the decline in industrial supplies came from lower petroleum costs. The one (marginally) positive figure in this report was the increase in goods exports for consumer goods (up $38 million).

Meanwhile, goods imports were also down significantly, as noted above. Industrial supplies and materials (down $5.98 billion), consumer goods (down $2.11 billion) and automotive vehicles and parts (down $562 million) were all down significantly for the month. At the same time, there were slightly higher goods import levels for foods, feeds and beverages (up $144 million) and non-automotive capital goods (up $95 million).

These data suggest that the stronger U.S. dollar, sluggish growth overseas and reduced energy prices have had negative impacts on trade. Indeed, these headwinds have dampened demand for manufactured goods exports. Moving forward, policymakers can also help by pursuing new opportunities that will open up new markets, including passage of Trade Promotion Authority and enactment of trade agreements in Asia and Europe. Moreover, the Export-Import Bank needs to be reauthorized long-term, ending financial uncertainty for manufacturers and their customers.