Last month showed solid increases in retail and wholesale inventories, which may somewhat ease the effect of the trade deficit on domestic GDP growth.
Many economists predict that U.S. GDP grew a mere 1 percent in the first quarter following a 6.9 percent gain in the fourth quarter of 2021.
Demand for imports have increased greatly since 2021, due to the U.S. economy’s rapid recovery from the pandemic, but the uptick in demand and rising prices have the downside of accelerating high inflation rates.
Economic growth had shown signs of stalling in the latter half of the quarter, after businesses were increasingly concerned about the effect the war in Ukraine on front-loaded imports.
Russia and Ukraine were major exporters of key commodities, including wheat, sunflower oil, fertilizer, strategic metals, oil, and gas.
The United States and its allies have imposed massive sanctions against Russia for its invasion but the sanctions, combined with the disruption of exports from Ukraine, have led to global shortages.
U.S. port facilities have sought to unload a huge backlog of imported goods sitting in cargo ships offshore, especially on the West Coast. But a positive sign that the congestion is easing is the recent surge in imports.
An estimate of wholesale inventories for March showed a 2.3 percent increase from February or $837.7 billion, with retail inventories rising 2 percent from February at $684.3 billion, as businesses try to restock low inventories and keep up with strong demand for their goods and services.
Motor vehicle stocks also rose 1.2 percent.
Last year, the U.S. posted the largest trade deficit in history, when the goods deficit topped $1 trillion for the very first time.
The trade deficit in March grew to 17.8 percent to a high of $125.3 billion, up $19 billion from $106.3 billion in February, which likely reflected both higher volumes and prices, according to the data.
Imports to the U.S. of consumer goods rose 13.6 percent, while imports of motor vehicles increased 12 percent, with a 15 percent surge in industrial imports including oil products.
The surge in the value of industrial supplies, led by higher energy prices due to the Russian invasion of Ukraine, are part of reason for the increase in the U.S. trade deficit.
Oil prices have jumped since the invasion and have remained around $100 a barrel, five times the value from 2020.
Meanwhile, American exports rebounded more slowly in the first quarter, but have also risen to historical highs.
Exports of U.S. made goods in March rose 7.2 percent to $169.3 billion, an $11.4 billion from February, while imports of goods in March shot up $294.6 billion at 11.5 percent, which was $30.3 billion more than February.
This was led by a 12.3 percent rise in exports of industrial supplies, with auto exports going up 8.4 percent and additional solid gains in food, capital, and consumer goods exports.
Many economists are already beginning to lower their weak GDP growth estimates for the season, which show the economy as barely growing or even contracting.
The ballooning trade deficit during the period is a key reason behind economists’ projections for a slowdown in economic growth during the period from the end of 2021.
The Federal Reserve raised its policy interest rate by 25 basis points in March to battle inflation with its first rate hike in more than three years. It is expected to raise rates again in May.
Any positive changes in the trade shortfall may not be happening any time soon, as U.S. demand is outpacing economic activity in other countries around the world.
The CCP’s severe lockdowns to contain a recent outbreak of the pandemic is becoming a negative factor in the short term, as the draconian measures have strangled Chinese exports and further strained already stressed global supply chains.
The new data will be used by government analysts to fine-tune its first quarter gross domestic product report due on April 28.
The full trade report for March, which includes tourism and travel service will be published next week on May 4.
