US goods trade deficit hits record high; inventories rise

WASHINGTON: The US trade deficit in goods widened to a record high in March amid a broad surge in imports, suggesting that trade remained a drag on economic growth in the first quarter.

The report from the Commerce Department on Wednesday also showed solid increases in retail and wholesales inventories. But the pace of inventory accumulation was probably not fast enough to provide a boost to gross domestic product growth.

Economists expect the government’s snapshot of first-quarter GDP on Thursday to show a sharp deceleration in economic growth.

The goods trade deficit jumped 17.8% to an all-time of $125.3 billion. Imports of goods accelerated 11.5% to $294.6 billion. They were boosted by a 15.% surge in industrial supplies, which include petroleum products.

Consumer goods imports vaulted 13.6%, while motor vehicles increased 12.0%. There were also solid gains in imports of food and capital goods.

Exports of goods increased 7.2% to $169.3 billion. They were led by a 12.3% rise in exports of industrial supplies. Motor vehicle exports advanced 8.4%. There were also increases in exports of food, capital and consumer goods.

Trade has subtracted from gross domestic product growth for six straight quarters, the longest such stretch since the beginning of 2016.

The surge in imports is being driven by businesses replenishing inventories amid strong domestic demand. Wholesale inventories rose 2.3% in March after shooting up 2.6% in February. Retail inventories increased 2.0% after gaining 1.5% in February. Motor vehicle stocks rose 1.2%.

Excluding motor vehicles, retail inventories increased 2.3% after rising 1.5%. This category goes into the calculation of GDP.

According to a Reuters survey of economists, GDP growth likely slowed to a 1.1% annualized rate last quarter from the fourth quarter’s robust 6.9% pace. Inventories added 5.32 percentage points to the fourth quarter’s growth pace.

Inventories would need to increase by more than the fourth quarter’s $193.2 billion rate to contribute to GDP growth in the January-March quarter.