U.S. Expected to Post Drop in Trade Deficit
Higher sales of U.S. goods overseas are expected to have cut the trade deficit for February from the prior month, but economists say the trade report due Thursday is likely to show that imports remain unacceptably high.
Most economists expect that the trade gap contracted to about $11.5 billion after January’s $12.4-billion shortfall, and some estimates are running as low as $10 billion.
The expected decline in the nation’s monthly trade shortfall in part reflects a seasonal rebound in U.S. exports. The United States typically ships more in February than in January. Thus, economists believe that exports rose to between $23.3 billion and $25.6 billion in February from $22.3 billion in January.
“Seasonals suggest that the unadjusted trade deficit will not be as large this time,” said Sonia Stromeyer of MMS International, who anticipates an $11.5 billion shortfall.
But economists are worried by the continuing strong demand in the United States for foreign goods, which is slowing the improvement in the nation’s trade balance.
Although a weaker dollar has helped U.S. firms gain market share overseas, foreign manufacturers are maintaining their grip on the lucrative American market, they say. Imports are expected to have risen to between $34.8 billion and $37 billion in February from $34.8 billion the month before.
“While there are clear signs of U.S. competitiveness, it is principally a function of exports increasing sharply rather than imports flattening,” said Robert Brusca of Nikko Securities Co. International Inc.
Leap Year Effect
Brusca put the February trade deficit at $11.8 billion, and said it would have been even smaller had 1988 not been a Leap Year, producing a long February.
“The first day of February was a Monday, as was the last day, maximizing the number of business days in the month. There were two more days in the month than in the average February,” Brusca said.
Joseph Carson, senior economist at Chemical Bank in New York, foresees a trade gap of about $11.7 billion for the month, reflecting a rebound in U.S. exports and little change in imports.
“I believe people will be surprised . . . as to how much the trade deficit has improved,” Carson said.
A major concern among economists and business leaders is whether America’s major trading partners will be able to absorb enough imports from the United States to keep the U.S. economy expanding as it shifts from a major importer to a major exporter.
Carl Weinberg, chief economist at High Frequency Economics in New York, said that, except for West Germany, America’s trading partners will enjoy strong economic growth this year.
The Commerce Department reports merchandise trade on a non-seasonally adjusted basis, although this will change with the April statistics due for release in June.
Jason Benderley of Goldman Sachs & Co. said he expects the February trade gap to be $11 billion, which he said would correspond to about $13.5 billion on a seasonally adjusted basis, compared to $12 billion in January.
Since the middle of 1986, the seasonally adjusted monthly deficit has come to about $14.5 billion, Benderley said. “So while $13.5 billion is still better than it was, it’s still not as good as the markets were expecting,” he added.
