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PNC Senior Economist Abbey Omodunbi: U.S. Trade Deficit Widens To Record in March;

Michigan Business Network
May 6, 2022 6:00 PM

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Trade Will Likely Be a Drag on Growth in the Second Quarter of This Year

  • The U.S. trade deficit widened in March to $109.8 billion from $89.8 billion, according to the Census Bureau.
  • The goods deficit widened to $128.1 billion in March from $107.8 billion in February while the services surplus increased to $18.3 billion in March from $18.0 billion in February.
  • Trade has been a drag on GDP growth for seven straight quarters and will likely be a drag on growth again in the second quarter of this year.

The U.S. trade deficit surged 22% in March, widening to a record $109.8 billion from $89.8 billion in February. This was worse than the consensus expectation for a widening to $107.1 billion.

The goods deficit widened to $128.1 billion in March from $107.8 billion in February while the services surplus increased to $18.3 billion in March from $18.0 billion in February. The value of exports rose 5.6% in March to $241.7 billion while the value of imports increased 10.3% to $351.5 billion.  Exports of goods in March were $170.7 billion, the highest on record.

Industrial supplies led the way for goods exports, jumping 12.4% on the month. Food and beverage imports rose 5.4% and consumer goods rose 2.1%. Automotive vehicle exports rose 8.4% on the month.

Industrial supplies imports led the way for goods imports, jumping 17.4% in March. Capital goods rose 7.5% and consumer goods jumped 13.6%. Automotive vehicle imports were up 10.7% while food and beverage imports rose 6.4%.

Services imports increased to a record $52.7 billion while services exports edged up to $71.1 billion.

The trade deficit has widened to record levels during the pandemic driven by a shift in consumer spending patterns away from services toward durable goods. The dollar’s upward march in March contributed to the strength in imports. Lockdowns in China, increased geopolitical risks and global growth concerns weighed on exports. Trade was a major drag on GDP growth in the first quarter of this year, subtracting 3.2 percentage points from annualized growth.

The near-term trade outlook is cloudy. The continued strength in the dollar is negative for trade; a stronger dollar means Americans can buy more imports and exports are more expensive for foreigners. Also, the continued lockdowns in China and the escalation of the Russia-Ukraine crisis are headwinds to trade. Trade will likely be a drag on growth again in the second quarter of this year.

The PNC Financial Services Group, Inc. is one of the largest diversified financial services institutions in the United States, organized around its customers and communities for strong relationships and local delivery of retail and business banking including a full range of lending products; specialized services for corporations and government entities, including corporate banking, real estate finance and asset-based lending; wealth management and asset management. For information about PNC, visit www.pnc.com.

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Michigan Business Network is an online broadcasting company that provides knowledge, news, and insights into Michigan’s businesses, industries, and economy.