The U.S. trade deficit dropped to near a 3-1/2-year low in February as the coronavirus pandemic pushed imports from China to their lowest level since 2009.
The Commerce Department said on Thursday the trade deficit fell 12.2 per cent to $39.9 billion, the lowest level since September 2016. The percentage decline was the largest since March 2018.
Data for January was revised slightly to show the trade gap tightening to $45.5 billion instead of $45.3 billion as previously reported. Economists polled by Reuters had forecast the trade gap would decrease to $40.0 billion in February.
When adjusted for inflation, the goods trade deficit tumbled $9.0 billion to $69.0 billion in February. That was the lowest since February 2015. While the smaller so-called real trade deficit is a positive in the calculation of gross domestic product, declining imports means less inventory accumulation, which could offset the contribution to GDP.
The economy is, however, believed to have contracted in the first quarter as strict measures by states and local governments to control the spread of the coronavirus from mid-March brought the country to a sudden halt, triggering a wave of layoffs. That would be the first quarterly contraction since early 2014.
Economists believe the economy is already in recession.
The National Bureau of Economic Research, the private research institute regarded as the arbiter of U.S. recessions, does not define a recession as two consecutive quarters of decline in real gross domestic product, 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.
The politically sensitive goods trade deficit with China dropped to $16.0 billion, the lowest since March 2009. Imports from China in February were the lowest since May 2009. Exports to China were the fewest since June 2010.
In February, goods imports fell 2.4 per cent to $198.4 billion. That was the lowest since October 2017, and reflected decreases in imports of capital goods, industrial supplies and materials, consumer goods.
Goods exports rose 0.7 per cent to $137.2 billion in February.
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