Trade Deficit in U.S. Widened in March on Oil Imports

The U.S. trade deficit widened more than forecast in March as the highest oil prices in more than two years boosted imports, eclipsing record exports.

The trade gap rose 6 percent to $48.2 billion, the biggest since June, from $45.4 billion in February, the Commerce Department reported today in Washington. The median forecast of 72 economists surveyed by Bloomberg News projected it would widen to $47 billion. Sales abroad climbed by the most in 17 years.

Crude oil costs that surged above $100 a barrel for the first time in more than a year and a 9.4 percent drop in the dollar will probably keep driving up the cost of imports. At the same time, the weaker currency is making American goods more competitive to customers in emerging markets from Argentina to China, benefiting manufacturers like United Technologies Corp. (UTX) and Caterpillar Inc. (CAT)

“With higher oil prices we’re likely to see the deficit widen a bit in the near term” said Gus Faucher, director of macroeconomics at Moody’s Analytics Inc. in West Chester, Pennsylvania, who forecast a $48.3 billion deficit. “We’re going to see the deficit stay within this range. The weaker dollar will help support exports and limit import growth somewhat.”

The dollar held earlier gains against the euro after the report on concern Greece will be forced to restructure its debt. The European currency fell to $1.4343 at 8:47 a.m. in New York from $1.4409 yesterday. The dollar also gained against the yen, rising to 81.13 from 80.88 late yesterday. .

Estimates in the Bloomberg survey ranged from $43 billion to $49.3 billion. The Commerce Department had previously estimated the February shortfall at $45.8 billion.

Crude Oil

Imports climbed 4.9 percent to $220.8 billion, the highest level since August 2008, from $210.4 billion. A jump in fuel prices and increasing demand for autos and computers led the gain.

A barrel of crude oil cost an average $93.76 in March, the most since September 2008, the Commerce Department said. Excluding petroleum, the trade gap shrank to $16.9 billion from $20 billion in February.

Exports increased 4.6 percent, the biggest gain since March 1994, to $172.7 billion. Increasing demand overseas for autos, chemicals and industrial machinery contributed to the advance. The gain also reflected record sales to customers in South and Central America, and the highest purchases from countries in the European Union since June 2008.

The dollar’s 9.4 percent drop from June 7, 2010, to March 31 against a weighted basket of currencies from the country’s biggest trading partners is making American-made goods cheaper abroad and foreign-made goods more expensive in the U.S.

Emerging Markets

Combined with growth in emerging economies such as Brazil and India, the decrease in the dollar will probably continue to help lift exports.

United Technologies, maker of Carrier air conditioners, last month said 2011 sales would be at the high end of its forecast as pent-up demand stokes growth globally.

“As we look across the globe, we see end markets are improving,” Chief Financial Officer Gregory Hayes said on an April 20 conference call. “Emerging markets continue to lead worldwide economic growth and UTC’s businesses are capitalizing on this opportunity.”

Caterpillar said it expects global economic growth this year of about 4 percent, with developing countries expanding by 6.5 percent and the U.S. by 3.5 percent. The company plans about $3 billion in capital spending this year, with more than half of that in the U.S.

Manufacturers Prosper

Caterpillar posted first-quarter profit that topped analysts’ estimates and raised its full-year earnings forecast as sales surged in developing countries. The Peoria, Illinois-based maker of earthmoving equipment said its outlook would have been higher had it not been for the March 11 earthquake in Japan.

“Our facilities in Japan were not damaged by the earthquake and tsunami, but many of our suppliers in Japan were,” Chief Executive Officer Doug Oberhelman said on a conference call April 29. “As a result, we are experiencing sporadic production disruptions at many of our facilities around the world.”

The trade gap with China, a source of political tension, narrowed to $18.1 billion from $18.8 billion in February. Exports to the Asian nation climbed 13 percent, while U.S. imports increased 1.2 percent.

Top-ranking officials from the U.S. and China met in Washington this week amid U.S. pressure for China to allow the yuan to rise against the dollar.

China-U.S. Relations

U.S. Treasury Secretary Timothy F. Geithner and Chinese Vice Premier Wang Qishan pledged May 9 to tackle currency, financial services and trade conflicts between the world’s two biggest economies at the start of the two-day Strategic and Economic Dialogue.

After eliminating the influence of prices, which renders the figures used to calculate GDP, the trade deficit widened to $50.1 billion from $49.3 billion. The government may have estimated an even bigger gain when calculating last quarter’s GDP, signaling trade was less of a drag on growth. The world’s largest economy grew at a 1.8 percent annual pace from January though March, down from a 3.1 percent pace in the prior three months, according to figures from the Commerce Department.

To contact the reporter on this story: Bob Willis in Washington at bwillis@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net

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