TRADE DEFICIT IN US WIDENS MORE THAN ANTICIPATED

By NBF NEWS
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The trade deficit in the United States widened in February more than anticipated as imports climbed, adding to evidence of a rebound in economic growth.

The gap increased by 7.4 per cent to $39.7bn from a revised $37bn the prior month, the Commerce Department said on Tuesday in Washington. Imports climbed 1.7 per cent as Americans bought more computers and televisions made abroad, while exports rose to the highest level since October 2008 Bloomberg News reported.

The need to replenish depleted inventories and gains in consumer spending mean purchases of goods and services from overseas will keep growing in coming months. Exports will probably also advance as global growth accelerates, giving companies from Caterpillar Incorporated to Dow Chemical Company a boost.

'We're at a stage in the business cycle where both imports and exports should be rising,' Chief Financial Economist at Jefferies & Company, Mr. Ward McCarthy, 'It tells us that we're growing moderately. This is not a typical recovery because you have consumer and housing headwinds, but so far it is sustainable and I think it will continue to be so,' he added.

The dollar extended losses against the yen after the report to trade at 92.71 yen to the dollar at 8.59am from 93.24 yen late on Monday. The dollar weakened to $1.3613 per euro from $1.3592 late on Monday.

Prices of goods imported into the US rose less than anticipated in March, indicating few signs of building inflation pressures from abroad, another report showed. The 0.7 per cent increase in the import-price index followed a revised 0.2 per cent drop in February, Labour Department figures showed. Prices excluding petroleum fell by 0.2 per cent last month, the first decline since July 2009.

The trade gap was projected to widen to $38.5bn from an initially reported $37.3bn in December, according to the median forecast in a Bloomberg News survey of 73 economists. Projections ranged from deficits of $35.8bn to $41.6bn.

After eliminating the influence of prices, which are the numbers used to calculate Gross Domestic Product, the trade deficit grew to $42.5bn from $40.9bn in January. The average for the first two months of the year is about the same as in the prior quarter, indicating that trade will have little influence on growth figures.

Purchases of foreign-made goods increased to $182.9bn as demand for consumer goods, including televisions, toys, pharmaceuticals and clothing climbed to the highest level since October 2008.

With the economy generating 162,000 jobs in March, the most in three years, US consumers are beginning to spend more freely after the first back-to-back annual declines in purchases since the 1930s. That spending will probably continue to drive import growth.

US companies are beginning to replenish inventories after last year's record drawdown, also boosting demand for foreign- made goods and materials. Efforts to stabilise inventories accounted for two-thirds of the 5.6 per cent growth rate in the fourth quarter of 2009.