World Economy

US Trade Gap Shrinks to $41.8b

US Trade Gap Shrinks to $41.8bUS Trade Gap Shrinks to $41.8b

The US trade deficit fell to $41.8 billion in January from December as imports declined more than exports, said the Commerce Department.

The trade gap narrowed from a revised December reading of $45.6 billion, previously estimated at $46.6 billion. The January number was slightly less than analysts expected, Reuters reported.

Imports of goods and services fell 3.9 per cent to $231.2 billion, mainly due to a fall in imported goods led by industrial supplies and consumer goods.

Petroleum imports fell as oil prices drop and the US pumps out high levels of crude, boosted by shale-oil and hydraulic fracturing production.

Exports declined 2.9 percent to $189.4 billion, reflecting a slow global economy in recent months.

Goods exports dropped, particularly exports of industrial supplies, while the decline in exports of services was led by the transport sector, which includes freight and port services.

A months-long West Coast port slowdown over a contract dispute had severely backed up cargo in January. The dispute was settled in late February, but the backlog was expected to take some time to work through.

“The strong US dollar and low oil prices should keep a lid on the US trade deficit by holding down the value of nominal imports. A stronger US economy and cheaper imports will boost import growth,” said Kyle Hillman of Moody’s Analytics.

Stronger US demand should help stimulate economic activity in other countries, especially in Europe and Asia, providing support for faster global growth this year and in 2016, the analyst said.

 Little Change

The January data showed little change in the overall US foreign trade gap. The three-month moving average ending in January slipped slightly to $42.3 billion.

But the politically sensitive trade gap with China increased to $28.6 billion from $28.3 billion in December.

Exports to the world’s second-largest economy, which is undergoing a slowdown, tumbled 22 percent to $9.6 billion, while imports from China dropped 5.8 percent to $38.2 billion.

The goods deficit with Japan also increased to $6.5 billion.

The lackluster trade data coincided with a strong February jobs report yesterday from the Labor Department.

The US economy added 295,000 jobs in February despite some severe weather disruptions and mounting layoffs in the oil industry.

The better-than-expected jobs growth pushed the unemployment rate down to 5.5 percent, from 5.7 percent previously, the lowest level since May 2008.

“The economy won’t get help from trade this year, but consumers should more than carry their weight, especially if job growth remains this strong,” said BMO Capital Markets senior economist Sal Guatieri.

The US economy expanded at a breakneck annual pace of 4.8 percent in last year’s spring and summer, only to slow to a tepid 2.2 percent rate in the final three months of 2014. Many economists estimate that growth is picking up slightly in the current quarter to an annual rate of 2.5 percent to nearly 3 percent.

Still, economists remain bullish about hiring despite the slowdown in growth.