The US trade deficit increased by the most in more than a year in March as a record drop in exports offset a shrinking import bill, suggesting the novel coronavirus outbreak was upending the global flow of goods and services.
Other data on Tuesday showed the tough measures to slow the spread of COVID-19, the respiratory illness caused by the coronavirus, pushed the nation's vast services sector into contraction in April for the first time in nearly 10-1/2-years.
The reports were the latest indication that the economy was sinking deeper into recession and that a sharp rebound was unlikely even as parts of the United States started to reopen.
The Commerce Department said the trade deficit jumped 11.6%, the largest rise since December 2018, to $44.4 billion.
Economists polled by Reuters had forecast the trade gap increasing to $44.0 billion in March.
In the United States gross domestic product declined at a 4.8% annualized rate in the first quarter, the steepest pace of contraction in output since the fourth quarter of 2008. Economists believe the economy entered recession in the second half of March when the social distancing measures took effect.
The National Bureau of Economic Research, the private research institute regarded as the arbiter of US recessions, does not define a recession as two consecutive quarters of decline in real GDP, as is the rule of thumb in many countries. Instead, it looks for a drop in activity, spread across the economy and lasting more than a few months.
A survey on Tuesday from the Institute for Supply Management (ISM) showed its non-manufacturing activity index fell to a reading of 41.8 last month, the first contraction since December 2009. It was also the lowest level since March 2009 and followed a reading of 52.5 in March.
A reading below 50 indicates contraction in the services sector, which accounts for more than two-thirds of US economic activity. The ISM survey's measure of new orders for the services industry dropped to a record low in April.
In March, the politically sensitive goods trade deficit with China decreased $4.2 billion to $11.8 billion, a 16-year low. Imports from China fell, while exports to that country rose.
When adjusted for inflation, the overall goods trade deficit increased $6.5 billion to $75.3 billion in March. Despite's March's increase, the so-called real goods trade deficit narrowed sharply in the first quarter.
But trade's contribution to first-quarter GDP was offset by a sharp drawdown in inventories as well as weaker consumer spending and business investment because of plunging imports.
In March, exports dropped a record 9.6% to $187.7 billion, the lowest since November 2016. Goods exports tumbled 6.7%, the most since December 2008, to $128.1 billion. There were decreases in exports of capital goods, which fell $2.0 billion to $42.6 billion, the lowest since November 2016.
Exports of motor vehicles and parts dropped $2.5 billion to $11.3 billion in March, the weakest since November 2011. Shipments of consumer goods hit a seven-year low in March. Exports of services tumbled $10.8 billion to $59.6 billion, the lowest level since November 2013, hurt by travel restrictions because of COVID-19.
Imports dropped 6.2% to $232.2 billion, the lowest since November 2016. The percentage decline in imports was the biggest since January 2009. Goods imports fell 2.3% to $193.7 billion in March, the lowest since August 2017.
The import bill has been shrinking as the United States waged a trade war with China. A sharp reduction in crude oil imports has also been a factor, with the United States becoming an oil exporter last year. The country posted a record $2.1 billion petroleum surplus in March.
In March, imports of automotive vehicles, parts, and engines dropped $2.7 billion to $27.8 billion, the lowest since February 2015. Consumer goods imports decreased $4.0 billion to $47.4 billion, the lowest since April 2016. There was a sharp decline in cellphone imports.
The petroleum import bill in March was the smallest since May 2016. Imports of services were down $10.7 billion to $38.5 billion in March, the least since August 2013.
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