Trade Gap Shrinks 4.1% in February
The U.S. trade deficit narrowed in February as imports fell by the largest amount in nearly a year and the trade gap with China shrank almost 23%, the Commerce Department said Wednesday.
The February trade shortfall at $65.7 billion was still the third-highest on record, suggesting that the annual trade deficit could surpass last year’s record of $723.6 billion.
The 4.1% narrowing from January’s record $68.6 billion in January, however, was more than Wall Street analysts had expected and hinted at slightly stronger U.S. economic growth in the first quarter than previously thought.
“The narrower trade deficit is a positive piece of news for February. However, with energy prices going up recently, you have to remember that there’s a good chance that the trade deficit will widen again over the next [few] months,” said Patrick Fearon, senior economist with A.G. Edwards & Sons in St. Louis.
U.S. imports fell 2.3% in February to $178.7 billion, the largest month-to-month decline since March 2005 but the second-highest on record after January. Many analysts had expected imports to retreat after surging in the first month of 2006.
The politically sensitive trade deficit with China narrowed significantly in February to $13.8 billion, the lowest since March 2005. Analysts, however, noted that the deficit with China usually narrows early in the year because of disruptions related to the Lunar New Year holiday.
The smaller trade gap, which reflected a 16.2% drop in imports and a 17% rise in exports, comes just a week before President Bush is expected to press Chinese President Hu Jintao for action on a number of trade irritants, such as Beijing’s currency policy, at a White House meeting.
February exports to China, at $4.1 billion, were the second highest on record.
U.S. overall exports fell 1.2% in February to $113 billion but, like imports, were second only to the record set in January. Exports of capital goods, such as computer accessories and industrial machines, and industrial supplies and materials were also the second highest on record.
Average oil import prices jumped nearly $2 a barrel in February to $53.72, the Commerce Department said. The value of crude oil imports, however, fell slightly to $15.6 billion because of lower shipment volumes.
U.S. exports to members of the Organization of the Petroleum Exporting Countries reached $3.3 billion, topped only by the $3.4-billion record set in December 1997.
Meanwhile, a separate report indicated that U.S. mortgage applications fell for the first time in three weeks as a nearly four-year high in interest rates dissuaded consumers from taking out home loans.
The Mortgage Bankers Assn. said its seasonally adjusted index of mortgage application activity for the week ended April 7 decreased 5.5% to 579.4 from 612.8 the previous week.
