U.S. Trade Deficit Shrinks To Narrowest Since September 2016

Reflecting a steep drop in the value of imports, the Commerce Department released a report on Thursday showing the U.S. trade deficit narrowed significantly in the month of February.

The Commerce Department said the trade deficit narrowed to $39.9 billion in February from a revised $45.5 billion in January. The deficit shrank to its lowest level since hitting $39.0 billion in September of 2016.

Economists had expected the deficit to narrow to $40.0 billion from the $45.3 billion originally reported for the previous month.

The narrower deficit came as the value of imports plunged by 2.5 percent to $247.5 billion in February after slumping by 1.7 percent to $253.8 billion in January.

Imports of capital goods showed a substantial decrease, with imports of computers leading the way lower, while imports of industrial supplies and materials and consumer goods also fell sharply.

Paul Ashworth, Chief U.S. Economist at Capital Economics, said the steep drop in imports is “old news that mainly reflects the lockdown in China.”

“In one sense, lower imports are arithmetically good for first-quarter GDP,” he added. “But in this case, any decline is likely to be offset by a matching run-down in inventories.”

Meanwhile, the report said the value of exports fell by 0.4 percent to $207.5 billion in February after sliding by 0.6 percent to $208.3 billion in January.

A notable decrease in exports of consumer goods was partly offset by increases in exports of fuel oil and other petroleum products and automotive parts and accessories.

The Commerce Department also said the goods deficit narrowed to $61.2 billion in February from $67.1 billion in January, while the services surplus slipped to $21.3 billion from $21.6 billion.

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