What to Make of Wider Trade Deficit

In February, imports nudged up more than exports

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This week saw some good economic news for the U.S., with the Dow cresting above 11,000 and the federal deficit projected to be lower than anticipated. Now, in a sign that consumer demand may be on the rise, the U.S. trade deficit, which measures the gap between national exports and imports, is up by 7.4% over the previous month. The trade deficit climbed to $39.7 billion as both imports and exports increased, though imports rose at a greater rate.

  • How It Happened  The New York Times' Javier Hernandez, calling the report "another piece of evidence that the recovery was gaining momentum," explains, "Much of the increase came from imports of consumer goods, such as televisions and apparel, as the American labor market strengthened slightly and Americans began to spend more. Businesses snapped up imports as they worked to restock inventories and replaced aging equipment. Industrial supplies and capital goods, such as machinery and tools, underpinned much of the growth."
  • The Big Picture  Calculated Risk examines the news. "In general trade has been increasing, although both imports and exports are still below the pre-financial crisis levels. Exports boosted the economy over the last year, however it now appears that export growth has slowed. Imports are still increasing even with the lower oil deficit in February."
  • Import Boost Is a Mirage  Morgan Stanley's Ted Wieseman tells the Wall Street Journal, "A good portion of the gain in imports was attributable to $0.8 billion payment for Olympic broadcast rights that temporarily boosted services but will be unwound next month."
  • Could Slow U.S. Recovery  The Atlantic's Daniel Indivilgio cautions, "If this trend continues -- imports increasing while exports remain flat -- then that could limit the steepness of the economic recovery in the U.S. If more consumer spending is increasingly benefiting firms abroad, growth for U.S. companies will be smaller than it would have been if that additional spending was on domestic goods and services instead. And U.S. firms aren't making up that ground through their exports so far in 2010."
  • 'Natural Part of The Recovery'  IHS Global Insight analyst Nigel Gault sees some outliers, though. "As U.S. producers and retailers seek to re-stock inventories, they will pull in more imports. This is a natural part of the recovery process."
  • China Also Running Trade Deficit  The American Scene's Walker Frost observes, "China’s appetite for commodities and energy continues to soar. But if the financial crisis taught us anything it’s that China’s economy is not export-dependent, and it probably hasn’t been for some time. ... This global economic restructuring should be welcomed so long as more value is being created than lost."
This article is from the archive of our partner The Wire.