The US trade deficit jumped to its highest level in almost six and a half years in March, suggesting the economy overall shrank in the first quarter of 2015.
The goods and services deficit leaped to $51.4bn (£33.8bn) from $35.9bn in February as imports rose more than exports. It was the largest trade gap since October 2008, a month after the collapse of US investment bank Lehman Brothers, and more than $10bn higher than the $41.2bn forecast by economists.
Imports jumped 7.7% or $17.1bn over the month to $239.2bn, as Americans splashed out on mobile phones, cars and furniture. At the same time exports rose by just 0.9% or $1.6bn to $187.8bn.
The spike in imports also partly reflected a rebound in activity following the end of strike action at key West Coast ports that had disrupted activity earlier in the year.
The first official estimate of growth for the first three months of the year showed the world’s largest economy only just scraped growth at an annual rate of 0.2%.
However, March’s trade gap was much larger than the $45.2bn deficit the government had assumed at the time of the first estimate and economists said the latest figures suggested the growth numbers would be downgraded as far as to indicate the economy contracted.
Paul Ashworth, chief US economist at Capital Economics, said growth could be revised down to reflect a fall of about 0.3% at the time of the second estimate later this month. “The surge in the monthly trade deficit to a massive $51.4bn in March means that the US economy undoubtedly contracted slightly in the first quarter,” he said.
A stronger dollar – as well as the West Coast labour dispute – has also weighed on US trade, making its goods and services more expensive abroad while imports are cheaper.
US imports of food, capital and consumer goods were the highest on record in March. Imports of petroleum products on the other hand were at a record low, reflecting lower oil prices and as the increase in energy production in the US has reduced the country’s dependence on foreign oil.
The US trade deficit with China increased by $10.5bn to $37.8bn in March.
The weak trade performance will reinforce expectations that the Federal Reserve is in no rush to raise interest rates and will instead wait for stronger growth before announcing the first hike in borrowing costs for nearly a decade.
Jasper Lawler, analyst at CMC Markets, said the weak US trade data “generated further doubt over the sustainability of the US economic recovery”. The dollar fell against a range of currencies after the weaker-than-expected data was published by the commerce department.
This article was written by Angela Monaghan, for theguardian.com on Tuesday 5th May 2015 17.07 Europe/Londonguardian.co.uk © Guardian News and Media Limited 2010