U.S. goods trade deficit increases by 2% in January

U.S. goods trade deficit increased by two percent in January due to the rise of imports and exports,  leaving trade on track or no impact on gross domestic product growth in the first quarter, the Commerce Department said on Tuesday.

“Trade will probably be starting out the first quarter on track to make a roughly neutral contribution to GDP,” said Lou Crandall, chief economist at Wrightson ICAP.

Goods imports showed an increase by 3.4 percent, motor vehicle imports by nine percent, consumer goods imports reached 6.4 percent and food capital goods increased, while industrial supplies that include crude oil have declined.

The economy’s annual growth pace of 2.7 percent was affected by the small trade deficit, and was boosted by the growth from inventories. However, inventories show that they could be a drag GDP growth this quarter, as businesses liquidate unwanted goods or hold back placing large orders for merchandise amidst worries of a recession this year, according to Reuters.

Wholesale inventories fell by 0.4 percent last month, despite inclining by 0.1 percent in December, as stated in the Commerce Department advance indicators report on Tuesday.

Growth estimations for the first quarter are currently high, reaching 2.8 percent as consumer spending and factory production are going strong.