The U.S. trade deficit in goods and services widened from $40.3 billion in December to $46.3 billion in January, a change that reflected a healthy increase in exports coupled with a really, really big increase in imports.  Let’s talk about exports first. Exports rose 2.7 percent in January (an increase of $4.4 billion), and reached an all-time record (in nominal terms). The January increase wasn’t driven by a single factor, instead many categories of exports increased (for instance, sometimes the changes in the monthly export numbers are driven by changes in civilian aircraft – in January, our exports of civilian aircraft actually decreased). Recall that the pace of export growth picked up at the end of last year and although we’re just talking January, 2011 is off to a good start. Another piece of good news is that the exports of services for 2010 will be revised up by about $2.5 billion based on survey data for Q3 (that will boost the growth rate of services exports for 2010 by half a percentage point or so). So, all in all, things have been going well on the export side.

Moving on to imports. Wow, up over $10.5 billion, or 5.2%, which is a big increase for a single month. Like exports, there wasn’t a single cause for this surge. Petroleum imports did increase strongly (9.5%, or $3.0 billion), and this increase was attributable to an increase in the number of barrels imported and an increase in prices (where prices played a bigger role than barrels).As we wrote yesterday, there is usually a month lag between spot energy prices and the price of imported oil that is reflected in the monthly trade release. What does this mean? It means that the more recent increases in the price of oil will continue to increase our trade deficit for the next couple of months. As I have often touted here, as a country, we spend a lot of our national treasure on oil ($265 billion last year alone), and that is likely to get worse in the next couple of months. Outside of petroleum, imports increased in a bunch of categories, especially capital equipment. One positive side-effect of capital equipment imports is that it signals that U.S. businesses are increasing their investment.