Trade Deficit Shrinks, Petroleum Imports Fall in February 2011

Ask anyone’s opinion and they will likely say the trade balance deficit is growing.  After all, fuel prices are rising and most fuel is imported.

Approximately 15% to 20% of the value of imports are petroleum products.  But typically, in February, petroleum use falls.  February 2011 was no exception.  January 2011 petroleum imports were $32 billion vs $27 billion for February 2011.  Last year January 2010 imports were $24 billion vs $23 billion a month later.

Knowing that there was a $5 billion drop in petroleum imports in February 2011 over January, it will be no surprise that the US Census believes trade balance contracted in February 2011:

The U.S. Census Bureau and the U.S. Bureau of Economic Analysis, through the Department of Commerce, announced today that total February exports of $165.1 billion and imports of $210.9 billion resulted in a goods and services deficit of $45.8 billion, down from $47.0 billion in January, revised.

February exports were $2.4 billion less than January exports of $167.5 billion. February imports were $3.6 billion less than January imports of $214.5 billion. In February, the goods deficit decreased $1.0 billion from January to $59.3 billion, and the services surplus increased $0.3 billion to $13.6 billion. Exports of goods decreased $2.5 billion to $118.0 billion, and imports of goods decreased $3.4 billion to $177.3 billion. Exports of services were virtually unchanged at $47.2 billion, and imports of services decreased $0.2 billion to $33.6 billion.

The goods and services deficit increased $6.0 billion from February 2010 to February 2011. Exports were up $20.5 billion, or 14.2 percent, and imports were up $26.6 billion, or 14.4 percent.

Econintersect uses unadjusted data in its review of trade data.  Seasonal adjustment factors are suspect when the data is noisy or covering periods of recession and recovery.

Exports continue to be the green shoot in the economy with record level exports for the month of February.  Seasonally, you might argue it is not as good as it should be – but you miss the major growth occurring.

Historically, imports decline in February.  Here, it is obvious there is no consistency in the decline but overall it appears the decline was larger than normal – no doubt due to the larger than normal decline in petroleum imports.

But the overall trade balance for February 2011 seems within the normal range.  The seasonal adjustments are likely telling the wrong story – the trade deficit normally shrinks in February, and the 2011 shrinkage appears to correlate to most years except 2010.

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