US trade deficit hits record high in January

WASHINGTON: The US trade deficit widened to a record high in January amid a surge in imports, potentially setting up trade to remain a drag on economic growth in the first quarter.

The Commerce Department said on Tuesday that the trade deficit jumped 9.4% to an all-time high of $89.7 billion in January. Data for December was revised to show a $82.0 billion shortfall instead of the previously reported $80.7 billion.

“The deficit is poised to remain elevated for now on ongoing strong demand for imports,” said Rubeela Farooqi, chief US economist at High Frequency Economics in White Plains, New York.

Economists polled by Reuters had forecast an $87.1 billion deficit. Trade has subtracted from gross domestic product growth for six straight quarters. Growth estimates for the first quarter are mostly below a 2.0% annualized rate. The economy grew at a 7.0% pace in the fourth quarter.

Imports increased 1.2% to $314.1 billion, also the highest on record. Goods imports surged 1.8% to an all-time high of $264.8 billion. There were record-high imports of food, capital and consumer goods.

Non-petroleum imports were also the highest on record. Imports are rising as businesses continue to replenish inventories to meet strong domestic demand.

Some of the rise in imports reflected higher prices as well as ships offloading goods after being held up at ports because of worker shortages.

Imports of services fell $1.0 billion to $49.3 billion in January, pulled down by transport and travel.

Economists saw a limited impact on trade from Russia’s war on Ukraine, which has resulted in the United States imposing trade sanctions on Moscow. Russia accounted for only 1% of imports and about 0.4% of exports last year, according to government data.

“Sanctions will cut off almost all trade between the US and Russia over the coming months, but with that trade only a trivial amount of the total, that will have little impact on the headline trade figures,” said Michael Pearce, a senior US economist at Capital Economics in New York.

In January, exports fell 1.7% to $224.4 billion. Goods exports decreased 1.5% to $155.9 billion. There was a decline in exports of consumer goods, including pharmaceutical preparations. But capital goods exports increased and exports of industrial supplies and materials were the highest on record.

Exports of services dropped $1.6 billion to $68.5 billion, reflecting decreases in travel and transportation.