The Bureau of Economic Analysis and the Census Bureau said that the U.S. trade deficit shrank to $42.96 billion in February from $44.46 billion in January. The lower deficit was the result of increased goods exports, up from $130.85 billion to $132.19 billion.
February’s goods exports figure was the second-highest level ever – second only to December 2012’s $132.82 billion. At the same time, goods imports were marginally lower in February, down from $192.55 billion to $192.41 billion. The service sector trade balance was largely unchanged, with the surplus up from $17.24 billion to $17.26 billion.
The petroleum trade balance helps to explain much of the change in the goods market. The petroleum trade deficit narrowed from $24.33 billion in January to $21.21 billion. Unlike the decline in the trade deficit in December, this narrowing did not correspond with a decrease in petroleum prices. The price of West Texas intermediate crude was $88.25 a barrel in December, and it was $95.32 in February. But, the February crude oil price was actually a slight increase from the $94.69 a barrel observed in January. This implies that the increase in petroleum exports and corresponding decrease in petroleum imports might be due to other factors, such as changes in global demand or seasonal adjustments in the data.
The non-petroleum goods trade balance actually widened from $36.97 billion to $38.30 billion. Looking specifically at areas of strength in the goods export market, the largest gains were in the industrial supplies and materials (up $1.83 billion), other goods (up $463 billion, and automotive vehicles (up $169 million). The industrial supplies and materials figure was boosted by an additional $1.08 billion in fuel oil and other petroleum products exports. These gains, though, were counteracted by decreases of non-automotive capital goods (down $758 million), consumer goods (down $312 million), and foods, feeds, and beverages (down $101 million).
In terms of goods imports, industrial supplies and materials were down $2.59 billion, but as we saw in the exports numbers, almost the entire decline stemmed from reduced crude and fuel oils imports. The other major import categories were mostly higher, including increased imports for automotive vehicles and parts (up $1.10 billion), consumer goods (up $695 million), non-automotive capital goods (up $348 million), and foods, feeds, and beverages (up $238 million).
The fact that the U.S. trade balance narrowed is good news, but much of the shift in the data stemmed from petroleum flows. Outside of petroleum, exports were up less dramatically. Manufactured goods exports, on a non-seasonally adjusted basis, totaled $183.78 billion in the first two months of 2013, or 2.45 percent higher than the $179.38 billion seen in January and February 2012. That suggests very slow growth in manufactured goods exports, and increases well below the 15 percent required to double exports by 2015. In 2012, manufactured goods exports rose 5.5 percent using seasonally adjusted data, which was below the 15.9 percent growth rate seen in 2011.
As might be expected, exports to Europe remain challenged. Year-to-date (January and February only, not seasonally adjusted) exports to Europe have fallen from $54.49 billion in 2012 to $50.19 billion in 2013. Japan, which is struggling to revive its economic condition has also experienced some weaknesses (down from $11.09 billion to $10.18 billion). Elsewhere, the export picture was better, with increased exports so far this year to Canada (up from $45.35 billion to $46.28 billion), Mexico (up from $34.15 billion to $35.61 billion), China (up from $17.13 billion to $18.69 billion). Those three countries are the three largest markets for U.S.-manufactured goods exports, so the fact that we have made some inroads there is a positive thing.
Chad Moutray is chief economist, National Association of Manufacturers.