The goods trade deficit in USA widened to a record in March, likely because companies concerned about shortages brought forward imports after the Russian invasion of Ukrainewhich increased the risk that the economic growth stalled in the first quarter.
The report of Department of Commerce Wednesday also showed solid increases in retail and wholesale inventories. That could offset some of the impact on growth in Gross domestic product of the huge trade gap.
The data prompted economists to lower their already low estimates of GDP expansion for the first quarter to show the economy barely growing or even contracting. The government is due to publish its first GDP data for the first quarter on Thursday. Economists warned against reading too much into any number as it could be a misleading picture of the economy.
“While first-quarter GDP growth looks weak overall, domestic final sales performed quite well during the quarter,” he said. Daniel Silvereconomist at JPMorgan In New York.
The goods trade deficit jumped 17.8% to an all-time high of $125.3 billion. The increase was probably due to both higher volumes and prices. Goods imports accelerated 11.5% to $294.6 billion. They were boosted by a 15% rise in imports of industrial supplies, which include petroleum products.
Imports of consumer goods grew by 13.6%, while those of motor vehicles increased by 12.0 percent. There were also solid gains in imports of food and capital goods.
“The advancement of imports related to the war between russia and ukraine likely drove much of the increase in imports, at a time when companies were building inventories of basic goods and finished goods in anticipation of potential shortages,” he said. Goldman Sachs in a note.
Goods exports rose 7.2% to $169.3 billion. They were led by a 12.3% rise in shipments of industrial inputs. Motor vehicle exports advanced by 8.4%. There were also increases in exports of food, capital and consumer goods.
Trade has subtracted from GDP growth for six consecutive quarters, the longest stretch since the beginning of 2016. With these data, Goldman Sachs it lowered its first-quarter GDP estimate to a 1.3% pace from 1.5%. JPMorgan cut its forecast to a 0.7% pace from a 1.1% rate. IHS Markit believes the economy actually shrank at a rate of 0.6%, down 0.7 percentage points.
Inventory increase
The increased imports it is being driven by companies replenishing inventories in a context of strong domestic demand. Wholesale inventories rose 2.3% in March after advancing 2.6% in February. Retail inventories rose 2.0% after gaining 1.5% in February.
Excluding motorized vehicles, retail inventories rose 2.3% after rising 1.5% in February. This category enters into the calculation of GDP. Inventories added 5.32 percentage points to the fourth quarter’s strong 6.9% growth pace.
While the housing market likely supported GDP growth last quarter, momentum is slowing as housing stocks rise. mortgage rates and house prices. Other data from Wednesday Mortgage Bankers Association showed that loan applications to buy a house decreased 8% last week from the previous week.
The cooling off in housing demand was corroborated by a third report from the National Association of Realtors which shows its index of pending home sales, based on signed contracts, fell 1.2% in March to 103.7. That was the fifth consecutive monthly decline and took contracts to the lowest level since May 2020.
Economists had forecast contracts, which convert to sales after a month or two, would decline 1.6 percent. Pending home sales fell 8.2% in March on a year over year basis.