U.S. Trade Deficit Down for February
The U.S. trade deficit shrank sharply in February to its smallest monthly total in more than a year as a slowing economy drew in smaller volumes of foreign-made goods and oil, government figures showed.
Separately, a key gauge of future economic activity fell in March for the second straight month, signaling continued weakness in the U.S. economy but not enough to result in a recession, a private research group said.
The Conference Board said its index of leading economic indicators fell 0.3% to 108.5 after sliding 0.2% in February.
“The latest readings suggest that the economy may be no stronger in the second quarter than it was in the first and the slower economic growth will continue into the summer,” said Conference Board economist Ken Goldstein. “But still, no recession is on the horizon.”
In an attempt to avoid a recession, the Federal Reserve on Wednesday unexpectedly cut interest rates by one-half percentage point. It was the fourth cut and the second surprise reduction of the year.
The trade shortfall narrowed by 19% in February to $26.99 billion from $33.25 billion in January, the Commerce Department said.
The February deficit was the smallest shortfall since a gap of $25.66 billion in December 1999 and was sharply contrary to Wall Street economists’ forecasts for a narrowing to $32.91 billion.
The decline in the deficit apparently reflected weaker U.S. demand and consumer spending, with the value of imports posting a monthly decline of $5.39 billion to $117.45 billion in February.
That was the lowest monthly total for imports since $116.71 billion in May and stemmed from an import reduction of new cars and consumer goods ranging from toys and games to clothing, household goods and television sets.
“This is what is supposed to happen when the economy slows,” said Bill Cheney, chief economist at John Hancock Financial Services Inc. in Boston. “Imports had to come down. What is surprising is they didn’t come down sooner.”
The value of imported petroleum and other energy-related goods decreased sharply to $8.79 billion during February from $10.49 billion in January.
Manufacturing industries have been in a virtual recession, which has reduced their need for imported oil as factories worked at a slower pace during the winter.
Exports rose by a modest $878 million to $90.46 billion in February, including a near doubling in overseas sales of new commercial aircraft to $2.76 billion from $1.58 billion in January.
The nation’s monthly deficit with China, a key supplier of many consumer goods, fell to $5.07 billion from $7.23 billion in January and was the lowest for any month since a $4.8-billion gap in April 1999, the Commerce Department said.
The deficit with Canada, the largest U.S. trading partner, narrowed to $4.5 billion from $5.9 billion while the deficit with Mexico narrowed to $1.5 billion.
The nation’s deficit with Western Europe narrowed to $3.3 billion, reflecting an increase in U.S. exports to Europe to $16.2 billion, the second-highest level on record.
In its report, the Conference Board said the positive contributors to the index of leading indicators were money supply, the index of consumer expectations and manufacturers’ new orders for non-defense capital goods and materials.
Additional negative contributors to the index were vendor performance, building permits and the interest rate spread. Average weekly manufacturing hours held steady for March.
Despite its gloomy forecast, the group’s index of coincident indicators, which measures current economic activity, shows that the economy continues to expand, albeit modestly. That figure rose 0.1% in March, the same rate of change as in February after no change in January.
The index of lagging indicators, which reflects changes that have already occurred, slipped 0.4% in March, the second consecutive monthly decline and the third decline in the last four months.
