US trade deficit widens to near five-year high in January

America's foreign trade shortfall with the rest of the world widened in January to a near five-year high, as the country sourced more cell phones and textiles from overseas.

The total trade deficit in goods and services increased from -$44.3bn in December to -$48.5bn at the start of 2017, according to the Department of Commerce.

Imports of goods rose from $192.6bn in December to $197.6bn for January, while total imports increased by $5.3bn to $240.6bn.

Purchases of foreign-made cell phones jumped by $1.0bn and those of textiles by $300.0m.

In parallel, the surplus on the services balance slipped from $21.4bn to $21.2bn.

On a bilateral basis, the deficit on goods trade with the European Union decreased from -$12.2bn in December to -$11.5bn for January, whereas those with Canada and China widened. In the case of the EU, a drop in civilian aircraft exports was more than offset by $2.4bn fewer imports of passenger cars and fertilisers and pesticides.

The US exported $1.6bn less to China in January, primarily less soybeans and civilian aircraft, engines, and parts, even as Americans upped the ante on their purchases of Chinese apparel and footwear by $2.0bn.

Americans also bought more goods from their northern neighbour during the month, to the tune of an extra $1.0bn, mainly in the form of crude oil, passenger cars, and fuel oil, sending the goods deficit higher from -$2.1bn to -$3.6bn.

"The sharp widening in the trade deficit in January to its highest level in almost five years suggests that net trade will once again be a drag on first quarter GDP growth, which we expect to be close to 2% annualised.

"[...] That said, the recent improvement in the surveys suggests that exports should have expanded at a stronger pace in both February and March, so any drag is likely to be far smaller than in the fourth quarter. Furthermore, with the headwind from the dollar’s prior appreciation having eased and global growth picking up quite sharply, the outlook for exports is better now than it has been in some time," said Andrew Hunter, US economist at Capital Economics.