Trade Deficit in U.S. Probably Narrowed as Exports Climbed

The trade deficit probably narrowed in December as stabilizing overseas markets helped lift U.S. exports for a second month, economists said before a report today.

The gap shrank to $46 billion from $48.7 billion in November, according to the median of 73 estimates in a Bloomberg survey. Another report may show wholesaler stockpiles grew less in December than in the prior month.

China’s growth picked up toward the end of 2012 and the euro region is starting to show signs of recovering from a recession, indicating American companies such as Caterpillar Inc. will benefit from improving demand. At the same time, it will be difficult for the trade shortfall to narrow further as a growing U.S. economy also leads to gains in imports.

“Global growth is coming back up and that’s good for exports,” said Harm Bandholz, chief U.S. economist at UniCredit Group in New York. “U.S. imports can be expected to rise as domestic demand improves. The trade deficit will gradually get wider.”

The Commerce Department will release the trade figures at 8:30 a.m. in Washington. Estimates of economists surveyed by Bloomberg ranged from deficits of $48 billion to $42.3 billion.

At 10 a.m., another Commerce Department report may show wholesale inventories rose 0.4 percent in December after a 0.6 percent gain the prior month as businesses kept stockpiles in line with sales, economists in the Bloomberg survey predicted.

Oil Prices

A drop in oil prices in December may have helped to keep a lid on the value of imports, today’s trade data may show. The cost of imported petroleum fell 0.8 percent in December, according to figures from the Labor Department.

It may get harder to contain the import bill as oil has advanced this year. Brent crude traded on the ICE Futures Europe exchange in London averaged $112.32 in January compared with $109.2 a barrel the prior month.

A weaker U.S. currency will make American exports more attractive to overseas buyers. As of Feb. 1, the dollar had dropped 4 percent from last year’s peak on June 1 against a trade-weighted basket of currencies from its biggest trading partners, according to Federal Reserve data.

Caterpillar, the world’s largest maker of construction and mining equipment, may benefit from improving prospects in the U.S. and abroad.

‘Increasingly Optimistic’

“The key phrase here when we talk about the world economy in 2013 is a bit better but still weak,” Michael DeWalt, a spokesman for the Peoria, Illinois-based manufacturer, said during a Jan. 28 earnings teleconference. “In the United States, we’re becoming increasingly optimistic,” and “in China, we’re expecting improvement in 2013,” he said.

China, the world’s second-biggest economy, accelerated in the final three months of 2012 for the first time in two years. The growth momentum is “relatively strong,” its central bank said this week, while warning that inflation risks may rise.

The 17-nation euro economy also is starting to stabilize after the sovereign debt crisis drove it into a recession last year. Economic weakness will prevail only “in the early part” of this year, European Central Bank President Mario Draghi said at a press conference in Frankfurt yesterday. “Later in 2013, economic activity should gradually recover, supported by our accommodative policy stance.”

Draghi signaled that policy makers are concerned the strength in the euro, which reached a 14-month high against the dollar this month, will hamper their efforts to pull the region’s economy out of the slump.

Concern about Europe is among reasons some American companies like Cummins Inc., a Columbus, Indiana-based maker of engines for trucks and power-generation equipment, are cautious.

“We start 2013 with a high degree of uncertainty about business conditions in several markets,” Thomas Linebarger, chairman and chief executive officer, said on a Feb. 6 earnings call. “In Europe, it’s hard to see a catalyst for growth in the near term.”

               Bloomberg Survey

=============================================
                             Trade  Whlsale
                           Balance     Inv.
                            $ Blns     MOM%
=============================================
Date of Release              02/08    02/08
Observation Period            Dec.     Dec.
---------------------------------------------
Median                       -46.0     0.4%
Average                      -45.8     0.4%
High Forecast                -42.3     0.7%
Low Forecast                 -48.0     0.3%
Number of Participants          73       26
Previous                     -48.7     0.6%
---------------------------------------------
4CAST Ltd.                   -47.0     0.4%
ABN Amro Inc.                -46.0     ---
Action Economics             -47.4     0.6%
Ameriprise Financial Inc     -45.8     0.4%
Banca Aletti & C spa         -44.5     ---
Bank of the West             -46.3     0.3%
Barclays                     -46.0     0.5%
BBVA                         -47.8     0.4%
BMO Capital Markets          -46.3     0.4%
BNP Paribas                  -43.0     ---
BofA Merrill Lynch Resear    -46.5     ---
Capital Economics            -45.5     ---
CIBC World Markets           -44.9     ---
Citi                         -45.0     ---
ClearView Economics          -47.7     0.5%
Comerica Inc                 -45.0     0.3%
Commerzbank AG               -46.0     ---
Credit Agricole CIB          -46.4     ---
Credit Suisse                -44.0     0.4%
Daiwa Securities America     -47.5     ---
DekaBank                     -46.0     ---
Desjardins Group             -47.5     0.3%
Deutsche Bank Securities     -45.5     0.4%
Deutsche Postbank AG         -45.5     ---
Fact & Opinion Economics     -47.0     0.5%
First Trust Advisors         -47.0     ---
FTN Financial                -45.6     ---
Goldman, Sachs & Co.         -45.0     ---
Hammer Partners SA           -47.0     ---
Helaba                       -45.0     ---
High Frequency Economics     -45.5     ---
HSBC Markets                 -47.0     ---
Hugh Johnson Advisors        -47.2     ---
IDEAglobal                   -46.0     0.5%
IHS Global Insight           -44.7     0.3%
Informa Global Markets       -43.9     0.5%
ING Financial Markets        -45.8     0.4%
Intesa Sanpaolo              -47.5     ---
J.P. Morgan Chase            -45.5     ---
Janney Montgomery Scott L    -45.0     0.3%
Jefferies & Co.              -46.8     0.4%
Landesbank Berlin            -42.3     ---
Landesbank BW                -43.0     ---
Lloyds Bank Wbm              -44.5     ---
Market Securities            -46.6     ---
Mizuho Securities            -48.0     ---
Moody’s Analytics            -44.7     ---
Morgan Stanley & Co.         -47.2     ---
National Bank Financial      -47.0     ---
Natixis                      -47.4     ---
Nomura Securities Intl.      -45.4     ---
Nord/LB                      -47.0     ---
Oxford Economics Ltd         -46.0     0.5%
Pantheon Macroeconomic       -45.0     ---
Pierpont Securities LLC      -45.5     ---
PNC Bank                     -44.5     ---
Raiffeisenbank Internatio    -46.7     ---
Raymond James                -45.4     0.7%
RBC Capital Markets          -45.2     ---
RBS Securities Inc.          -45.7     ---
Regions Financial Corp       -44.4     ---
Scotiabank                   -47.0     ---
SMBC Nikko Securities        -44.0     0.3%
Societe Generale             -43.3     0.6%
Standard Chartered Bank      -47.7     ---
Stone & McCarthy Research    -43.5     ---
TD Securities                -45.5     0.5%
Tullett Prebon               -46.0     ---
UBS                          -46.0     ---
Union Investment             -47.0     ---
University of Maryland       -46.0     0.3%
Wells Fargo & Co.            -45.6     ---
Wrightson ICAP               -46.5     0.5%
=============================================

To contact the reporter on this story: Shobhana Chandra in Washington at schandra1@bloomberg.net

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

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