The U.S. trade deficit narrowed to $49.3 billion in February from $51.1 billion in January, impacted by one-time factors in the aerospace and agriculture industries.
The deficit—which represents an eight-month low—boosted our first-quarter GDP estimate by 0.4 percent to 1.9 percent. The trade data in aerospace and agriculture, along with the increase in inventory building that spilled over into early 2019, will both create an overhang that will suppress GDP in the current quarter.
A $2.2 billion increase in aircraft exports was primarily responsible for the shrinking deficit; those exports were equivalent to a 60.5 percent increase on the month. Similarly, a 15.4 percent increase in exports of soybean was equal to a $1.4 billion increase, after quadrupling in January due to the gradual unwinding of the China-U.S. trade spat. With Boeing poised to sharply curtail production of its 737 Max jetliner, U.S. industrial production and exports of aircraft are poised to take a hit in coming months, which will suppress GDP going forward. The reduction in production of the 737 to 52 planes per month from 42 is strong enough to shave 0.3 percent off GDP growth this year.
The real dollar goods trade balance or the trade balance adjusted for inflation, narrowed to $81.7 billion from $83.5 billion a month earlier. The real dollar goods trade balance, factoring out petroleum, narrowed to $69.2 billion from $70.4 billion. On the month, exports increased 1.1 percent and imports were up 0.2 percent. The United States ran a $72 billion deficit in goods and a $22.62 billion surplus in services.
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