Trade Deficit in February Hits a 7-Year Low : Economy: Predictions that the recession may be ending were also bolstered by a decline in jobless claims.
The nation’s foreign trade deficit narrowed sharply in February to its smallest amount in more than seven years, mainly because of falling oil-import prices, the government reported Thursday.
Commerce Department figures showed that imports exceeded exports by only $5.33 billion over the month, down from $7.16 billion in January.
The improvement during February stemmed mainly from a drop in imports, which fell by 6.4% over the month, largely because of the impact of the recession on buying in this country.
Exports declined by 2.4%, though they remained close to their recent all-time highs. The United States has had an export boom for several months.
The figures came as, separately, the Labor Department reported that new claims for unemployment benefits fell for the second week in a row, bolstering predictions by some economists that the recession may be nearing an end.
The number of Americans filing for initial unemployment benefits dropped 22,000 to a seasonally adjusted 451,000 in the first week of April. During the previous week, claims dropped by 70,000 to 473,000 after soaring to the highest level in more than eight years.
The combination of figures brought generally encouraging reactions from economists. Fred Sturm, senior economist at Fuji Securities Inc. in New York, called the decline in new claims for unemployment benefits “one of the first palpable signs of the recovery.”
And the American Business Conference reported that a new survey of its members suggested that business activity is showing signs of a rebound. Barry Rogstad, the group’s president, called the poll “further evidence that the recent recession has bottomed out.”
Even so, some analysts were apprehensive that the start of an economic slowdown overseas may be taking the edge off the export surge that the nation has enjoyed. “The decline in exports is a concern,” according to Allen Sinai, chief economist of Boston Co. in New York.
February’s trade deficit was the lowest since September, 1983, when the monthly trade gap was $5.2 billion.
Oil imports plunged to $3.70 billion, a decline of more than 30% from January’s $3.91 billion, reflecting both a falloff in the volume of oil imported and a decline in crude oil prices from the highs to which they surged at the start of the Persian Gulf War.
Some economists have felt that the recession in the United States has led to a slackening in demand for foreign goods over the last several months and this is reflected in the improved balance of trade.
“The source of the improvement is worrisome,” Sinai said. “The main source of the improvement is recession in the United States.
“The decline in oil imports is a one-time thing, but the decline in non-oil imports is a trend.”
Besides imports of oil, U.S. purchases of foreign-made autos, industrial supplies and materials also fell sharply in February, the Commerce Department reported. However, imports of most consumer goods remained virtually unchanged from the month before.
The February figures brought the overall U.S. foreign trade deficit to an annual rate of $75 billion--far below last year’s total of $101 billion.
But economists said they do not expect the deficit to remain low, saying that as the recession ends, Americans’ demand for imported goods will increase at the same time as the demand in other countries slackens, slowing economic growth abroad.
“Most of the improvement we are going to see for the year probably has already occurred,” said Bruce Steinberg, an economist with Merrill Lynch in New York. “Our economy should pick up in the second half of the year, and once that happens, our import bill is likely to rise as demand rises.”
The export picture was also mixed. Exports of consumer goods, automobiles and capital goods decreased, but there were increases in the export of food and industrial supplies.
But Sinai saw the fall in exports as a sign of a worrisome trend, calling it a “product recession and slower growth overseas.”
David Rolley, a senior economist with DRI McGraw Hill in Lexington, Mass., called the falloff in American exports “not surprising.”
“The world economy has slowed down, and when growth is slowed, capital spending is flat,” Rolley said.
The U.S. trade deficit with Japan was $3.2 billion in February, a drop from January when it was $3.5 billion.
At the same time, the United States continued to run a trade surplus with Western Europe. And the U.S. trade deficit with members of the Organization of Petroleum Exporting Countries declined sharply, to $1.3 billion in February from $2 billion in January.
