[03/07/14] Flat U.S. trade in January offered the latest sign the economy is struggling to fire on all cylinders, as consumers at home and abroad spend cautiously.
The U.S. trade deficit widened 0.3% to a seasonally adjusted $39.1 billion in January from a month earlier, the Commerce Department said Friday. Exports climbed 0.6% to $192.5 billion. Imports rose 0.6% to $231.6 billion.
The report reflects soft demand abroad for American products and services as growth cools in major economies, such as China, and Europe continues to grapple with high unemployment. Meanwhile, American consumers have reined in spending during the winter, leading to fewer imports of goods such as cellphones and cars.
Weak growth in exports—which boosted the economy earlier in the recovery—means the U.S. must lean on other sources for growth, such as consumer spending at home and business investment.
“Basically we’re not being able to export things because the global economy is slower,” said Steven Ricchiuto, chief economist at Mizuho Securities. “The net result is trade is going to be a drag on the economy.”
In January, exports of industrial supplies and materials, capital goods and consumer goods edged higher, though the gains were modest. Exports of U.S. autos and food items fell.
The U.S. imported fewer consumer goods and cars, suggesting weak household spending. But there was a bright spot: Imports of capital goods—products like tractors, computers and machinery—climbed to the highest on record. That indicates American firms may be stepping up investment, which could bode well for the U.S. recovery.
It’s unclear how much the weak overall trade numbers reflect a temporary pullback by households due to the weather or a longer-lasting trend that could impede a speedier U.S. recovery in coming months. Many firms and economists say they expect stronger growth in the months ahead as the weather warms.
Unemployment remains high in the U.S. and abroad, and Americans’ incomes are growing slowly. That is weighing on household spending and keeping the recovery sluggish. The economy grew at a subdued, 2.4% annual rate in the final three months of last year, and many economists expect first-quarter growth to clock in at below 2%.
The underlying trend of exports is stronger. Overall exports in January were up 3.3% higher compared to a year earlier. Exports to China were up 10.4% from a year earlier. Exports to the European Union were up 6.2% and exports to Japan climbed 8%.
Other recent reports indicate U.S. factories lost momentum after the new year.
A key measure of factory activity picked up in February but still showed growth remained weaker than last fall, the Institute for Supply Management reported this week. The report also suggested export orders grew at a slower pace in February compared with a month earlier.
Publisher: Wall Street Journal
Author: Josh Mitchell
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