The advance estimate of the seasonally adjusted trade deficit in goods widened to $90.6 billion in March from $87.1 billion in February, which was revised down from $88.0 billion in the monthly report on goods and services trade; it had been $86.7 in the prior advance estimate.

Goods exports rose 8.7% on the month ($11.4 billion) after falling 3.6% in February. In March, there was a 15.3% jump in consumer goods exports, and a 10.1% increase in industrial supplies exports. Capital goods exports rose 7.3% after a 5.9% drop in February. From a year earlier, goods exports were up 11.5% in March.

Imports rose 6.8% ($14.9 billion) after falling 1.0% in February, and were up 20.6% from a year earlier. Capital goods imports rose 5.7% on the month; industrial supplies 7.6%, and consumer goods 7.0%.

The goods trade deficit has ballooned during the pandemic. Stimulus has kept American consumers spending through the pandemic, but restrictions on high-contact industries have diverted consumer spending from domestically-produced services to goods, much of which are imported. US exports are more weighted toward industrial goods than imports, and extreme economic uncertainty weighed on capital spending by foreign businesses and US goods exports.

In March, we see exports of capital goods and industrial supplies jumping; global manufacturing is recovering rapidly and manufacturers and wholesalers are trying to rebuild inventories depleted during the last year’s supply chain disruptions; this is fueling a rapid recovery in demand for capital and intermediate manufactured goods.

The goods deficit will show up as a drag on GDP in the first quarter of 2021, but the goods deficit will start to shrink by the end of 2021 and into 2022. As the pandemic comes under control in the United States, American consumers will spend less on imported goods, shrinking imports; and foreigners will buy more US exports as their economies recover further.

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