US trade deficit falls 9.6% in February

Canada fell back into a trade deficit as exports declined by the most in nearly a year, an unexpected setback following three months of surpluses.

Economists had generally expected another surplus - about $500 million, according to Thomson Reuters.

Jim O'Sullivan of High Frequency Economics said figures from the first two months of the year suggested net exports were likely to be neutral in calculations of first-quarter economic growth.

"After a huge January for the Canadian economy, it looks as though we could be in for some payback in the February data", wrote Benjamin Reitzes, senior economist at BMO Capital Markets. Overall, exports have grown more than 7 percent on the year when compared to the same period, from one year ago. Imports had risen in recent months, in part on higher oil prices.

The trade deficit with Germany was the smallest since January 2013.

The deficit with Japan fell US$600 million to US$4.9 billion.

Exports to the United States, Canada's biggest trading partner, declined 1.2 percent with decreases across categories, the statistics agency said.

The bank is expected to hold interest rates at 0.50 percent.

"We expect that tone to resonate at the next meeting", said Brittany Baumann, a macro strategist at TD Securities.

As a result, the politically sensitive U.S. Imports declined and exports improved amid a brighter outlook for global manufacturing. Imports of goods from China tumbled a record $8.6 billion to $32.8 billion in February, a 20.8 percent drop from January. It compares with $44.6 billion median estimate of economists.

"We need to crack down on countries with anti-competitive practices that lead to trade deficits in the United States if we want to restore some of our lost factory jobs".

"The U.S has its work cut out for it if it is going to try to alter the pattern of trade that has developed between China and US companies over the last 10 to 20 years", said Chris Rupkey, chief economist at MUFG Union Bank in NY.

The U.S. trade deficit fell from a near two year high in February as slowing domestic demand weighed on imports and stronger global growth boosted exports of American goods. Exports were lifted by gains in the shipments of automobiles and parts, which were the highest since July 2014. He believes that large deficits are slowing American growth and employment. Fading in dollar strength and a pickup in manufacturing sentiment could be a further boon to trade in the months ahead.

The value of exports fell 2.4 percent, the biggest decrease since March 2016, with declines widespread.

  • Zachary Reyes