With the value of exports increasing and the value of imports falling, the U.S. trade deficit continued to contract in the month of February, falling to its lowest level in over nine years.
The Commerce Department released a report on Thursday showing that the U.S. trade deficit narrowed to $26.0 billion in February from a revised $36.2 billion in January.
The sharp decline in the size of the trade deficit came as surprise to economists, who had expected the deficit to remain unchanged from the $36.0 billion that had originally been reported for the previous month.
With the decrease in size, the deficit in the month of February marked the smallest U.S. trade deficit since November of 1999.
The significantly narrower deficit came as the value of exports rose 1.7 percent to $126.8 billion in February from $124.7 billion in January, while the value of imports fell 5.1 percent to $152.7 billion from $160.9 billion.
Peter Boockvar, equity strategist at Miller Tabak, said, The lower than expected trade deficit will lead to an upward move in first quarter GDP estimates, but we'll see to what extent it will be offset by the bigger than expected drops in inventories that we've seen so far.
The minutes of the March Federal Open Market Committee meeting released on Wednesday showed that the members were particularly concerned about an apparent sharp fall in foreign economic activity, as it was having a negative effect on U.S. exports.
In light of the pervasive decline in foreign economic activity, members widely agreed that exports are not likely to be a source of support for U.S. economic activity in the near term.
In other trade-related news, the Labor Department released its report on import and export prices in the month of March. While imports prices increased after trending lower in recent months, export prices continued to fall.
The report showed that import prices rose 0.5 percent in March following a revised 0.1 percent decrease in February. The increase in import prices marks the first price growth in eight months.
The rebound in import prices was largely due to a 10.5 percent increase in the prices of petroleum imports. Excluding petroleum imports, import prices actually fell 0.7 percent for the third consecutive month.
At the same time, the Labor Department said that export prices fell 0.6 percent in March after edging down 0.3 percent in the previous month. With the decrease, export prices fell for the seventh time in the past eight months.
A 3.5 percent decrease in the prices of agricultural exports contributed to the continued decrease, although export prices still fell 0.3 percent excluding agricultural products.
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