The U.S. trade deficit unexpectedly shrank in February, according to the U.S. Census Bureau. The U.S. International Trade In Goods and Services report, released on Friday morning, showed that the trade balance narrowed from -$44.4 billion in January to -$43.0 billion in February, beating out expectations for a widening of the gap to -$44.8 billion.
February exports increased by $1.6 trillion to a total of $186.0 billion, while imports increased $0.1 billion to $228.9 billion. This difference is primarily due to a change in the petroleum deficit, which shrank from $24.3 billion in January to $21.2 billion in February. Meanwhile, the non-petroleum goods deficit expanded from $37.0 billion to $38.3 billion. The services surplus increased marginally, from $17.2 billion to $17.3 billion.
According to the report, the U.S. ran a surplus of $3.3 billion with Hong Kong (up from $2.7 billion in January), and a surplus of $1.3 billion with Australia (up from $1.2 billion in January). The U.S. ran a deficit of $23.4 billion with China (down from $27.8 billion in January), $8.8 billion with the European Union (up from $8.6 billion in January), and $5.9 billion with Japan (down from $6.1 billion in January).
Ostensibly, a narrowing of the trade gap is good news, but February’s report suggests weakness in international trade. The report shows that global demand has softened, likely as a result of ongoing economic weakness in the European Union. This weakness is not necessarily surprising to the markets, which currently have bigger fish to fry.
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