The trade gap widened today with exports down more than imports. Since exports add to GDP and imports subtract, the net effect of today’s international report will be a reduction in expected GDP for the first quarter of 2016.

Highlights

In a report pointing to economic weakness, the nation’s trade gap in goods widened 1.2 percent in January to $62.2 billion as exports fell 2.9 percent to offset a 1.5 percent fall in imports (imports are a subtraction in the national accounts). Exports fell across the board including industrial supplies at minus 3.0 percent in the month and capital goods down 2.3 percent. The decline in imports included a steep 6.8 percent drop in industrial supplies and a 2.4 percent decline for capital goods. The declines in industrial supplies are tied in part to low prices for oil and petroleum products while the declines in capital goods points to lack of global confidence in the business climate and lack of business investment in global productivity. This report represents the goods portion of the monthly international trade report which will be posted next Friday.

Recent History

The international trade in goods is expected to narrow slightly in January to an advance reading of $61.0 billion. Imports of goods have been steady with gains for autos offsetting declines for consumer goods. But goods exports have been clearly weak, especially for capital goods in a trend that points to lack of confidence in the outlook among foreign businesses and lack of investment in global productivity.

Definition

The Census Bureau is now publishing an advance report on U.S. international trade in goods. The BEA will incorporate these data into its estimates of exports and imports for the advance GDP estimates. This is expected to reduce the size of revisions to GDP growth in the second estimates.

That revision expectation certainly did not pan out. For details, please see 4th Quarter GDP Revised Up on Unwanted Buildup of Inventories.