April 3 (Bloomberg) -- The trade deficit in the U.S. unexpectedly widened in February to the highest level in five months as exports of fuels and capital equipment dropped.
The gap widened by 7.7 percent to $42.3 billion, the biggest since September, from the prior month’s $39.3 billion, Commerce Department figures showed today in Washington. The median forecast in a Bloomberg survey of 69 economists called for a reduction to $38.5 billion. Imports were little changed.
The deterioration in trade will further depress economic growth in the first quarter, which was already suffering from slowdowns in consumer spending and manufacturing caused by unusually harsh winter weather. The drop in exports will probably not be sustained as economies overseas, including the euro area, improve.
“Trade is going to be a little bit of a drag for first-quarter growth,” said Guy Berger, a U.S. economist at RBS Securities in Stamford, Connecticut, who had forecast a widening of the gap. 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.”
Service industries in the U.S. picked up in March after expanding at the slowest pace in four years, showing the biggest part of the economy was starting to thaw along with the weather, another report today showed. The Institute for Supply Management’s non-manufacturing index rose to 53.1 from 51.6 in February, the Tempe, Arizona-based group said today. Readings greater than 50 signal expansion. The median projection in a Bloomberg survey of economists called for a gain to 53.5.
Another report today showed the number of applications for unemployment insurance payments climbed last week, according to figures from the Labor Department. Jobless claims rose by 16,000 to 326,000 in the period ended March 29. The prior week’s 310,000 were the fewest in six months, indicating American companies were retaining staff.
Stocks were little changed after the reports. The Standard & Poor’s 500 Index fell less than 0.1 percent to 1,890.28 at 10:26 a.m. in New York after closing at a record yesterday.
Bloomberg survey estimates for the trade gap ranged from deficits of $35 billion to $41 billion. The Commerce Department initially reported a $39.1 billion shortfall for January.
Exports decreased 1.1 percent to $190.4 billion, depressed by declining sales of refined petroleum products. Fuel shipments to overseas customers had climbed in prior months as U.S. energy production grew.
Sales of U.S.-made products to buyers in South and Central America were the weakest since February 2011.
Imports climbed 0.4 percent to $232.7 billion, the most since October, from $231.7 billion in the prior month. A jump in purchases of automobiles and parts was offset by a slump in demand for capital equipment, including computers and telecommunications gear.
Demand for foreign-made goods was also held back by decreasing purchases of fuel as the U.S. economy, the world’s largest, produces more energy. Crude-oil imports in February fell to the lowest level since October 2010.
Excluding petroleum, the trade shortfall widened to $22.4 billion from $19.9 billion.
After eliminating the influence of prices, which renders the numbers used to calculate gross domestic product, the trade deficit grew to $50.1 billion from $48.5 billion. The average in the first two months of the year exceeds the average during the fourth quarter, indicating trade will subtract from growth.
The trade gap with China, the world’s second-biggest economy, slumped to $20.9 billion from $27.8 billion as American imports dropped.
Demand for foreign-made products may get a boost from rising U.S. consumer confidence. The Conference Board’s consumer sentiment index last month rose to its highest since January 2008.
Improvement in the euro area bodes well for American exports. Purchasing-manager indexes showed the region’s factory and services activity in the first quarter was the strongest in almost three years, and confidence in the area was the highest since 2011. The European Central Bank has forecast the 18-nation economy will grow 1.2 percent this year and 1.5 percent in 2015.
“Europe is certainly not a tailwind, but maybe less of a headwind than in the past,” James Owens, chief executive officer of H.B. Fuller Co., an industrial adhesives maker, said on a March 27 earnings conference call. Also, “several of the emerging markets that had in prior quarters generated significant growth, have slowed a bit due to various economic and political events.”
Russia’s standoff with the U.S. and the European Union over Ukraine, and the risks of prolonged ultra-low inflation in advanced economies and volatility in emerging markets pose a threat to the global economy, International Monetary Fund Managing Director Christine Lagarde said in a speech in Washington yesterday.
Two Chinese manufacturing gauges released on April 1 pointed to weakness in the world’s second-biggest economy last month. China this week outlined a package of measures including railway spending and tax relief to boost growth and create jobs after a slowdown endangered Premier Li Keqiang’s target of 7.5 percent growth this year.
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