WASHINGTON – The U.S. trade deficit narrowed in February from a seven-month high as demand for imports decreased for the first time in four months.
The gap shrank 2.6 percent to $45.8 billion from a larger-than-previously-estimated $47 billion in January, Commerce Department figures showed on Tuesday in Washington. The median forecast of economists surveyed by Bloomberg News projected a decline to $44 billion. Imports had reached a more than two-year high in January and exports were at record levels.
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The earthquake and tsunami in Japan may hurt trade volumes in coming months after parts shortages caused factories to shut down. At the same time, a 6 percent drop in the value of the dollar, combined with growing economies in emerging countries, will probably lift exports later this year and benefit manufacturers like Caterpillar Inc.
“We’re going to have some headwinds in the first half of the year, given the Japan situation, though we do expect trade to pick back up,” said Omair Sharif, an economist at RBS Securities Inc. in Stamford, Conn. “We’re going to have some disruptions in the supply chain, especially in the auto side, with all the news coming out of Japan.”
Prices of goods imported into the U.S. rose in March at the fastest pace since June 2009, led by a gain in crude oil and the biggest jump in food costs since 1994, another report on Tuesday showed. The 2.7 percent increase in the import-price index followed a 1.4 percent rise in February, according to figures from the Labor Department. Costs excluding fuel rose 0.6 percent.
Shares Fall
Stock-index futures held earlier losses after the reports as Alcoa Inc.’s sales missed analyst estimates and Tokyo Electric Power Co. said its earthquake-hit nuclear power plant may release more radiation than Chernobyl. The contract on the Standard & Poor’s 500 Index fell 0.5 percent to 1,312.6 at 8:39 a.m. in New York.
The trade gap was projected to contract from an initially reported $46.3 billion in January, according to the median forecast of 71 economists surveyed. Estimates ranged from deficits of $41 billion to $50.5 billion.
January’s deficit was the widest since June as demand for crude oil helped push imports up by 5.4 percent, the biggest jump since at least 1993.
Hurt Growth
After eliminating the influence of prices, which renders the figures used to calculate gross domestic product, the trade deficit narrowed to $49.5 billion from $50.3 billion. The number was larger than the $45.3 billion deficit averaged in the fourth quarter, indicating trade probably subtracted from growth in the first three months of the year.
Imports dropped 1.7 percent to $210.9 billion from $214.5 billion in the prior month, the most since August 2008. Decreasing demand for autos, which often reflects trade in parts with Canada and Mexico, and petroleum products led the decline.
Exports decreased 1.4 percent to $165.1 billion from a record $167.5 billion in January. Decreased demand for autos and parts and for capital goods like semiconductors and engines contributed to the drop.
The world economy will expand 4.4 percent this year and 4.5 percent in 2012, the Washington-based International Monetary Fund said yesterday in its World Economic Outlook report. Developing nations will grow 6.5 percent this year and next while advanced economies will expand 2.4 percent in 2011 and 2.6 percent in 2012, the IMF said.
The trade gap with China slumped to $18.8 from $23.3 billion the prior month.
Commodity Costs
Amid stronger global growth and turmoil in the Middle East, commodity costs are on the rise. The average price of a barrel of imported petroleum climbed to $87.17, the highest since October 2008. Americans responded to the increase by importing 242 million barrels in February, the fewest in 12 years.
A weaker dollar is making American-made goods cheaper for buyers abroad, boosting exports and generating more orders to U.S. manufacturers, the drivers of the economic recovery. The currency has fallen 6 percent in the year to April 8 against a weighted basket of currencies from the country’s biggest trading partners. It’s lost 17 percent since reaching an almost five-year high on March 3, 2009.
Increased overseas demand helped manufacturing expand in March at close to the fastest pace in almost seven years. The Institute for Supply Management’s factory index was little changed at 61.2, after February’s 61.4 reading that was the highest since May 2004, the Tempe, Ariz.-based group said April 1. Figures greater than 50 signal expansion.
Manufacturing Rebound
With factories churning out more goods to meet growing global demand, their shares have strengthened. The Standard & Poor’s Supercomposite Industrial Machinery Index, which includes manufacturers such as Caterpillar and Deere & Co., has jumped 37 percent in the 12 months through yesterday, compared with an 11 percent gain in the broader S&P 500.
Caterpillar, the world’s largest maker of construction equipment, is seeing a “slow, steady increase” in demand in North America, CEO Doug Oberhelman said at an industry conference on March 23. “Business is booming outside the U.S.”
The Peoria, Ill.-based company may also benefit from President Barack Obama’s April 7 decision to ask Congress to approve a free-trade agreement with Colombia, one of Caterpillar’s 10 largest U.S. export markets by country.
“Colombia is a huge market for us,” Oberhelman said in an interview March 30. “There’s infrastructure, there’s mining. We send a lot of equipment today, all of it built in the Midwest, most of it built in Central Illinois.”
