Economic activity is also being driven by the Federal Reserve’s ultra-loose monetary policy stance.
Manufacturers lack the ability to meet the increasing demand and stocks are extremely low, forcing companies to import more goods. Demand during the pandemic has also shifted to goods from services, with Americans confined to their homes.
The Commerce Department said Tuesday that the trade deficit rose 5.6% to a record $ 74.4 billion in March. The trade gap was in line with economists’ expectations.
Imports rose 6.3 percent to a record $ 274.5 billion in March. Goods imports increased 7% to $ 234.4 billion, also a record. Imports of consumer goods were the highest on record, as were imports of food and capital goods.
The United States imported a variety of products, including clothing, furniture, toys, semiconductors, cars, petroleum products, and communications equipment. However, civilian aircraft and cell phone imports declined.
The pandemic continued to burden exports of services, especially travel. At $ 17.1 billion in March, the services surplus was the smallest since August 2012.
After adjusting for inflation, the merchandise trade deficit rose by $ 4.2 billion, to a record high of $ 103.1 billion in March. The worsening trade deficit was already indicated in an advance report published last week.
Despite the larger trade deficit, the economy grew at an annual rate of 6.4% in the first quarter, the second fastest pace of growth in GDP since the third quarter of 2003, driven by lower domestic demand. This followed a 4.3% growth rate in the fourth quarter.
Most economists expect double-digit GDP growth this quarter, which would put the economy ahead of at least 7% growth, the fastest since 1984. The economy contracted by 3.5% in 2020, its worst performance in 74 years.