WASHINGTON-Department of Commerce trade data for March released today showed the U.S. trade deficit in goods and services increased $1 billion from February, to $40.4 billion. An increase in the services surplus partially offset a nearly $3 billion jump in the goods deficit. Most of this was in petroleum, but the manufactured goods deficit increased by $1.2 billion as manufactured goods imports expanded more rapidly than exports.

Manufactured goods exports, seasonally adjusted, stood at $83.8 billion in March, up 11% from February. Manufactured goods imports were $116.7 billion, up 13%. The figures reflected faster growth in consumer goods and automotive imports, not matched by an increase in capital goods exports-the predominant U.S. manufacturing export.

Comparing March to the same period a year ago, manufactured goods exports were 25% larger than March 2009-still running well ahead of the 15% annual rate that will be needed if the U.S. national goal of doubling exports in five years is to be reached. Manufactured goods imports, though, were up 24%, leading to an increase in the deficit.

The U.S. manufactured goods deficit has fallen nearly in half from its peak in 2006, the result both of a more competitive dollar and falling U.S. demand for imports due to the recent recession. The National Association of Manufacturers has expected the deficit to begin rising again with U.S. economic recovery, as consumer goods imports began to increase. Managing the U.S. manufactured goods deficit requires that U.S. exports grow faster than imports-particularly for capital goods. To achieve this goal will require policy changes to provide more incentives for export and more access to foreign markets through market-opening trade agreements.

So far in 2010 the brightest spot in manufactured goods trade remains the U.S. free trade partners, where collectively, U.S. manufactured goods are in surplus. The manufactured goods deficit is with countries that still maintain barriers to U.S. exports because they have not entered into market-opening agreements with the Unites States.