Largely reflecting a steep drop in the value of exports, the Commerce Department released a report on Wednesday showing the U.S. trade deficit widened more than expected in the month of February.
The Commerce Department said the trade deficit widened to $71.1 billion in February from a revised $67.8 billion in January.
Economists had expected the deficit to widen to $70.5 billion from the $68.2 billion originally reported for the previous month.
With the bigger than expected increase in February, the size of the U.S. trade deficit reached a new record high.
The wider deficit came as the value of exports tumbled by 2.6 percent to $187.3 billion in February after jumping by 1.1 percent to $192.2 billion in January.
The report showed a steep drop in exports of capital goods as well as decreases in exports on consumer goods, foods, feeds, and beverages and automotive vehicles and parts.
The sharp pullback in the value of exports outpaced a decline in the value of imports, which slid by 0.7 percent to $258.3 billion in February after surging up by 1.2 percent to $260.1 billion in January.
Significant decreases in imports of automotive vehicles and parts and pharmaceuticals were partly offset by a spike in imports of industrial supplies and materials.
Andrew Hunter, Senior U.S. Economist at Capital Economics, said the decreases in both imports and exports can largely be explained by the disruption to the manufacturing and petroleum sectors from the severe winter weather.
“Assuming both moves were reversed in March, as the weather disruption cleared, real exports are on course to have risen by about 6% annualized in the first quarter as a whole, with imports up by nearer to 10%,” Hunter said.
He added, “That means that net trade would subtract just over 1%pts from first-quarter GDP growth, which we still expect to be close to 7% annualized.”
Hunter said the drag from trade is expected to fade over the coming quarters, reflecting a pickup in growth in the America’s key export markets as virus restrictions are lifted and a boost to exports from an earlier drop in the value of the U.S. dollar.