International trade is down across categories and the deficit is up leading to skepticism of a rebound this year.
With the global slowdown and a strong dollar recently playing a role, this slide continues a trend that started in late 2014. However, the Friday jobs report was substantially more positive than expected and automotive imports hit record highs as the oil glut continues to spur growth.
The Commerce Department released their monthly report Friday showing a widened trade deficit at $45.7 billion in January, up $1 billion from last month, and up 4.8 percent from last January’s $43.6 billion.
The deficit was substantially higher than predicted. According to a Bloomberg survey of 63 economists, the average estimate was $43.6 billion, a whooping $2.1 billion lower than the published numbers.
January imports were $222 billion, down $2.9 billion from December and down 4.5 percent from last January’s $232.6 billion. This continued a slowdown which is the first ongoing slide since the 2008 financial crisis and only the third notable dip since imports began their steady rise in the 60s and 70s.
Source: Federal Reserve Bank of St. Louis
Exports were at their lowest point in five years, down $3.9 billion from December to $176.5 billion and down 6.7 percent from last January. These are the lowest numbers since June 2011’s $175.6 billion.
“We’re surprised that other economists’ estimates were so optimistic,” said Brittany Baumann, an economist at Crédit Agricole CIB whose trade deficit estimate at $45.3 billion was the closest to published numbers.
She forecasts a downward trend through 2017 with a strong dollar peaking in June and continuing to drag on trade.
“The January data was worse than the underlying trends,” said Lewis Alexander, Chief Economist at Nomura Securities International.
Coming from the opposite end, he forecast a $40.9 billion trade deficit. While surprised by the negative numbers, Alexander said there’s a lot of pessimism built into the market abroad that will thaw in the coming months.
“Everything is weak,” said Robert Brusca at Fact & Opinion Economics. “If you lose the strength in jobs, the view on the economy will turn 180 degrees.”
Brusca cited five months of contraction in manufacturing, according to the ISM Index, and anticipates worsening throughout the year as a strong dollar will push down industrial exports and domestic concern about the economy will dampen imports.
On the upside, 2015 was a record year for auto sales with growth continuing this year. January imports for automotive vehicles, parts and engines hit a record highs at $30.6 billion.
At Japanese Classics, a specialty car import dealership in Richmond, Virginia, sales are up 20 to 30 percent compared to last year and people no longer ask about gas mileage. The last couple months have been especially good.
“Our biggest issue is keeping cars in stock,” said Robert Edgeworth, head of sales. “When they come in, people pull the trigger.”