As we have emphasized in the past, never put too much focus on a single month’s trade numbers, as the monthly wiggles can be largely influenced by a wide set of idiosyncratic factors, such as exports of aircraft, imports of oil, spikes in the trading of pharmaceuticals, seasonal adjustments, the date of the Chinese New Year (seriously, see below)…

Before delving into some of the more interesting "weeds" of today's trade numbers, the top line stats show that imports decreased $3.6 billion in February from January, exports decreased $2.4 billion, and the trade deficit improved by $1.2 billion. 

Let’s start with petroleum as weed #1.  On a month-to-month basis, petroleum imports can fluctuate a bit (on average by about half million barrels per day, and in 2010, we averaged 9.3 million barrels per day in crude oil imports).  These monthly fluctuations arise from changes in inventory, weather, and the business cycle.  In February, our oil imports decreased by 4.4 percent as inventories of oil were drawn down.  Prices were basically flat, though we expect prices for imported petroleum to post increases in future months, as there’s usually a month lag between the spot prices you see in the press and when those prices are manifested in markets.  So, if the number of barrels we import increases, coupled with price increases, we may see some uglier import and trade deficit numbers in the coming months.  We’ve written about our petroleum-related trade deficit before, and given what is happening to oil prices (and gasoline prices), we’ll write about it again. 

Weed #2:  Exports.  Exports fell by $2.4 billion in February.  However, from October through January, exports increased an average of $3.3 billion per month, and in terms of percentage gains, exports were increasing very quickly.  So the decline in February, though not a welcome one, should be placed in the proper context.  Also, keep in mind that most of the month-to-month changes in exports arise from changes in exports of goods.  Services exports, the much steadier cousin of good exports, continued to grow and posted another record at $47.2 billion in February.

Weed #3:  Chinese New Year.  Although hard to quantify, the slowdown in economic activity in China during several weeks surrounding the Chinese New Year affects our trade.  On a non-seasonally adjusted basis, our imports of goods from China fell 13.1 percent in February, compared to a 4.3 percent drop in imports from the rest of the world.  Exports to China on the other hand, actually grew in February by $400 million (4.4 percent), whereas our exports to the rest of the world were flat.  Therefore, we may see a pickup in imports from China next month.

~Mark Doms, Chief Economist, U.S. Department of Commerce

April 12, 2011