The nominal trade deficit grew by $0.9 billion in February. Imports grew 1.7% month-over-month in February to $262.0B, while exports grew 1.7% month-over-month to $204.4B. The February nominal trade deficit was the highest since October 2008.
The real goods trade deficit declined by $0.85 billion in February compared to January as real goods exports increased 2.0% month-over-month and real goods imports grew 0.8% month-over-month. We view the real goods trade balance as a proxy for the U.S. real trade balance. With the real goods trade deficit averaging $69.5B in the first two months of 2018, net exports is likely to detract from Q1 2018 real GDP growth as the real goods trade deficit averaged a lesser $66.8B in Q4 2017.
Imports were lifted in February by charges for the use of foreign intellectual property, which surged $0.99B to a record $5.24B. The increase was driven by domestic broadcasters’ payments for rights to televise the PyeongChang Olympics. The surge in charges for intellectual property drove almost a quarter of the monthly increase in nominal imports in February, but the increase is fully expected to reverse in March.
Nominal levels of both exports and imports hit new all-time highs in February, a sign of healthy economic activity both domestically and abroad. While we do not expect net exports to add any substantial boost to real GDP growth in the coming quarters, the recent imports data suggests domestic demand remains strong. Consumer goods imports grew 13.7% year-over-year in February, the fastest pace since March 2015.