Exports rose while imports fell sharply, says IHS Global Insight. The petroleum deficit narrowed, but was a minor contributor to the overall decline.

The volume of goods exports rose 3.1% after five months of steep decline, observes Nigel Gault, chief US economist for IHS Global Insight. The simple story behind February's trade figures is that exports stopped falling while imports continued to plunge, he said.

Export volumes showed their first increase since July. Most major categories were up, though the biggest gains were in consumer goods (mainly pharmaceuticals), autos, and food and beverages. The export improvement is good news, and indicates that the steepest export declines are behind us. But given the weak state of overseas economies it is too early to be thinking about a sustained export rebound. The US recovery will not be export-led, said Gault.

Import volumes dived again, with big declines in industrial materials, capital equipment, and consumer goods. The lower import volumes reflect lower spending by US businesses on capital equipment, lower consumer spending, and a major inventory adjustment by US purchasers. The import decline shows how the US is passing on its demand weakness to the rest of the world. The US trade deficits with major exporters like China, Germany, and Japan have fallen sharply over the past twelve months as US import demand has weakened.

Gault cautioned that, “In an arithmetical sense, slashing imports does make a positive contribution to US growth, but when US recovery does begin to take hold it will mean an increase in imports as US demand recovers. As a result, the trade deficit will likely widen later this year,” says Gault, adding “but that won't be bad news.”