The numbers: The U.S. trade deficit with other countries jumped almost 5% in February to a record $71.1 billion, as a rapidly recovering economy enabled Americans to buy more imported goods.
The trade gap widened from a revised $67.8 billion in January, the government said Wednesday. Economists polled by Dow Jones and The Wall Street Journal had forecast the deficit to total $70.5 billion.
The previous record deficit on record occurred last November, when it topped $69 billion.
While higher deficits can point to a less productive economy, that’s not the case right now. The U.S. has recovered faster than most other countries and Washington provided massive financial stimulus, allowing Americans to spend more than citizens in Europe and elsewhere.
Last Friday, the government said the U.S. gained 916,000 new jobs in March in another clear sign the economy is strengthening.
The result: Americans are snapping up imported goods, but overseas purchases of U.S. products have lagged well behind.
Adding to the deficit has been a sharp drop in a long-running U.S. surplus in service exports, mostly the result of far fewer foreigners visiting America and spending money.
What happened: Imports slipped 0.7% to $258.3 billion in February, but they remained on the cusp of a record high.
The U.S. imported more oil and industrial supplies while shipments of autos and consumer goods fell.
The level of imports is now nearly 5% above-year ago levels. Purchases of imported goods might be even higher if not for a logjam at American ports, where many foreign products sit offshore as dockworkers scramble to unload a fleet of waiting shipping vessels.
The pileup is causing prices for many goods to increase and is leading to major shortages in some cases.
Exports fell a sharper 2.6% to $187 billion and still haven’t returned to precrisis levels. Exports totaled $208 billion in February of last year.
In February, the U.S. exported fewer planes, computer chips, autos and food.
The trade deficit in goods with China rose $3.1 billion to $30.3 billion.
Although the trade spat with China has faded from the frontpages after the departure of President Trump, the Biden administration has kept stiff U.S. tariffs on Chinese goods in place and does not appear ready to relax them anytime soon.
Big picture: The U.S. trade deficit is all but certain to remain at or near record highs in the short run. Once the economies of other countries catch up to the U.S., they are likely to start buying more American products and narrow the trade gap.
A large trade deficit subtracts from gross domestic product, the official scorecard for the U.S. economy. Yet a flood of federal spending and a revived private sector are dwarfing the negative impact of record deficits. Economists predict the U.S. will grow 6% or more in 2021.
What they are saying? “Faster U.S. growth relative to the rest of the world has widened the trade deficit to a historic record,” said economists Oren Klachkin and Gregory Daco of Oxford Economics. ” The trade deficit is poised to widen as the U.S. recovery surges in the spring and summer.”