US trade deficit in January largest since 2012

Columbia: The US trade gap shot up in January to its highest monthly level in almost five years, the Commerce Department reported Tuesday, and analysts say trade is likely to drag down growth.

The data showed trade was robust, with exports and imports of goods and services hitting their highest levels for a single month since December 2014.

The trade deficit jumped to $48.5 billion, a $4.2 billion increase from December and the highest since March 2012, driven in part by a $1.2 billion monthly drop in exports of civilian aircraft and engines and rising oil imports. 

The result, a 9.6 percent monthly increase, matched analysts expectations.

The trade gap was up nearly 12 percent compared to January 2016, with an 8.3 percent increase in imports outstripping a 7.4 percent increase in exports.

The January increase continues the trend in 2016 which posted the highest annual trade deficit in four years.

The US trade deficit in goods with China rose nearly 13 percent over December`s level. Widening deficits were also recorded with Mexico and Saudi Arabia. 

Jim O`Sullivan of High Frequency Economics said if the total deficit remains high through March it could decrease first-quarter growth by as much as a percentage point.

"We doubt that large a drag will be sustained in February and March but the data are negative for Q1 GDP nonetheless," he said in a client note, but noted that the first quarter tends to see lower growth historically.

Despite the big move in aircraft exports, Ian Shepherdson, chief economist at Pantheon Macroeconomics, pointed to the modest increase in exports excluding oil and aircraft, which were overwhelmed but a big jump in those imports, what he calls the "core deficit."

"We`re hoping for better news on core trade in February and March," he said, "but at this point our working assumption has to be that net trade will be a significant drag on Q1 GDP growth, subtracting perhaps 0.7 percentage points."

The figures could create additional fodder for President Donald Trump, who has railed against US trade policy and free trade agreements. 

In a departure from its predecessors, the Trump White House has darkly portrayed trade deficits as a threat to national security and vowed aggressive actions to reduce it, and to upend prevailing trade policy by renegotiating or withdrawing entirely from international trade pacts.