Trade Gap in U.S. Narrows More Than Forecast as Imports Drop

The trade deficit in the U.S. narrowed more than forecast in February as imports fell by the most in three years, reflecting the smallest amount of crude oil purchases in 15 years and a drop-off in demand for Chinese goods.

The gap shrank 12 percent to $46 billion, the smallest since October, from a revised $52.5 billion in January, the Commerce Department in Washington said today. The median estimate of 73 economists surveyed by Bloomberg News called for a deficit of $51.8 billion in February. Purchases of foreign goods decreased by 2.7 percent, the biggest decline since February 2009. Exports barely rose to reach a record.

The Chinese Lunar New Year holiday may have contributed to the slump in imports, indicating demand will probably rebound as a strengthening U.S. labor market bolsters consumer spending. At the same time, sales overseas by American companies may moderate as parts of Europe stagnate and China slows, a sign international commerce will be less of a source of strength for the world’s largest economy.

“As domestic demand begins to gain some momentum you should start to see imports pick up,” said Kevin Cummins, an economist at UBS Securities LLC in Stamford, Connecticut. “It appears that the drop in imports was reflective of the Chinese New Year. We’ve assumed slower export growth based on global growth slowing in 2012.” At the same time, he said, “it doesn’t appear that exports are likely to be a significant drag on the U.S. economy.”

More Americans than forecast filed applications for unemployment benefits last week and producer prices were little changed in March, figures from the Labor Department as showed today. Jobless claims increased 13,000 in the week ended April 7 to 380,000, the highest since Jan. 28.

Stock Futures

Stock-index futures trimmed earlier gains as investors were disappointed by the jump in jobless claims. The contract on the Standard & Poor’s 500 Index maturing in June rose 0.1 percent to 1,365.5 at 8:55 a.m. in New York, after having been up as much as 0.6 percent.

The median forecast in the Bloomberg survey called for the trade deficit to narrow from a previously estimated $52.6 billion in January. Projections ranged from $46.5 billion to $54.1 billion.

The value of imports in February declined to $227.2 billion, the fewest since November. In addition to petroleum, Americans also bought fewer consumer goods, like toys and clothing, and automobiles and parts from overseas.

Oil imports in February were valued at $23.4 billion, down from $28.1 billion the previous month. The number of barrels of imported crude dropped to 225.7 million last month, the fewest since February 1997.

Gap With China

The February trade gap with China narrowed to $19.4 billion, the smallest since March 2011, from $26 billion as imports plunged 18 percent, today’s report showed. The week-long Lunar New Year holiday, which extended into early February, may have limited demand from the Asian nation.

Total exports increased 0.1 percent to $181.2 billion, boosted by sales of capital equipment, like commercial aircraft and industrial machines to buyers overseas.

After eliminating the influence of prices, which are the numbers used to calculate gross domestic product, the trade deficit shrank to $44.1 billion, the smallest since April 2011.

The smaller-than-forecast gap may prompt some economists to boost forecasts for growth in the first quarter.

The world’s largest economy expanded at a 3 percent annual rate in the fourth quarter after growing at a 1.8 percent pace in the prior three months, Commerce Department figures showed on March 29. The trade gap subtracted 0.26 percentage point from GDP in the final three months of 2011, after adding 0.43 points in the prior quarter.

‘Challenging’ Environment

“Our business continues to be impacted by the challenging global economic environment,” Blake Jorgensen, chief financial officer of Levi Strauss & Co., said in an April 10 conference call with analysts. “All of Europe is in an economic doldrums in many ways. As you probably saw with China and India during the quarter, we’ve seen some slowing of the rapid growth there, and we’re seeing that show up as well in some of the consumer spending patterns of our consumer base in our stores.”

Revenue at Levi Strauss grew in the Americas and Asia Pacific region, while declining in Europe, he said.

The U.S. dollar has declined 1 percent this year through last week against a trade-weighted basket of currencies from the country’s biggest trading partners. The decrease makes American goods less expensive to foreign buyers, helping to offset any slowdown in demand.

The U.S. economy picked up heading into 2012 as the euro area faces a potential recession and China restrains its economy to stem inflation.

Growth Slowdown

The Chinese economy grew 8.9 percent in the last three months of 2011 from the same period a year earlier, the slowest pace for 10 quarters. The government last month lowered this year’s economic growth target to 7.5 percent, after keeping the goal at 8 percent over the past seven years.

The 17-nation euro economy will shrink 0.3 percent this year, according to the European Commission, which projects contractions in Italy, Spain, Belgium, Greece, Cyprus, the Netherlands, Portugal and Slovenia. By contrast, Germany’s economy is forecast to expand 0.6 percent.

To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net

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

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