U.S. Trade Deficit Widens More than Expected in February

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U.S. Trade Deficit Widens More than Expected in February U.S. trade deficit in February surprisingly reached a five-month high as capital equipment and fuel exports plunged.

In a briefing in Washington, the Commerce Department said that the gap stretched by 7.7 percent to $42.3 billion, the widest since September, up from January’s figure of $39.3 billion. The imports remained slightly unchanged. The figure was higher than the median estimate of $38.5 billion in a Bloomberg poll of 69 economists.

The poor showing in trade may impact negatively on the economic growth in the first quarter, which was hit by a drop in manufacturing and consumer spending due to the extreme winter weather.  However, the trend is expected to reverse as the global economic growth gains momentum.

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 “Trade is going to be a little bit of a drag for first-quarter growth,” Guy Berger, a Stamford, Connecticut-based economist at RBS Securities, who had earlier forecasted a widening of the gap told Bloomberg. Beyond that, “factors favor a gradual narrowing of the trade deficit. Exports will increase as many of the emerging markets are still expanding, and while Europe is not doing great, it is growing. Imports will rise as the economy gets better.”

Exports fell 1.1 percent to $190.4 billion, weighed by weak sales of refined petroleum products. Refined fuel shipments had climbed in January on higher U.S. energy production. Sales to Latin America also fell to an all-time low since February 2011.

Imports rose 0.4 percent to $232.7 billion, the highest since October, up from $231.7 in January.  However, demand for imports has been weakening due to lower fuel imports, as U.S. produces more of its own crude oil. Imports of the fossil fuel fell to their lowest since October 2010.

To contact the reporter of this story; Jonathan Millet at john@forexminute.com