Mon, May 07, 2012 - Page 10 News List

US trade deficit probably grew in March: survey

Bloomberg

The US trade deficit probably widened in March as imports rebounded from the biggest setback in three years, economists said before a report this week.

The gap grew to US$50 billion from US$46 billion in February, according to the median forecast of 62 economists in a survey taken ahead of a Commerce Department report set for Thursday. Other data may show wholesale prices, the cost of imports and consumer sentiment were little changed.

Companies probably bought more goods from abroad, reflecting higher fuel prices and a bounce back in shipments from China following the Lunar New Year holidays.

At the same time, exports may fail to keep pace as a slower global expansion hurts sales at companies like Caterpillar Inc and United Technologies Corp, indicating the US economy will not be able to count on an improving trade account to boost growth.

“We expect the oil import bill to soar,” said Paul Edelstein, director of financial economics at IHS Global Insight in Lexington, Massachusetts. “We expect foreign trade to be a drag on growth for the year.”

Purchases of foreign goods decreased by 2.7 percent in February, the biggest drop since February 2009, Commerce Department figures showed last month. Imports from China plunged 18 percent as the week-long Lunar New Year holiday extended into early February. That slump was probably reversed in March, Edelstein said, widening the trade gap.

More expensive petroleum may also have contributed to the gains. The price of foreign crude oil climbed 3.5 percent in March, according to figures from the Labor Department.

Fuel prices probably retreated last month, helping to restrain inflation from overseas. The cost of imported goods dropped 0.2 percent last month after jumping 1.3 percent the prior month, according to the median estimate of economists surveyed before the Labor Department’s update on Thursday.

A slowdown in hiring may restrain the wage growth needed to fuel US consumer spending, which means imports may keep slowing this quarter. Payrolls climbed by 115,000 workers last month, the smallest increase in six months, Labor Department figures showed last week. The jobless rate fell to a three-year low of 8.1 percent as people left the labor force, adding to worries that the economic expansion is cooling.

After reaching a record in February, US exports may also slow as economies from Europe, to China and Brazil decelerate.

In Europe, the debt crisis is curbing demand for goods as governments from Spain to Italy are forced to step up spending cuts. Eurozone unemployment rose to a 15-year high in March and manufacturing contracted last month for a ninth month, reports showed last week.

“The negative for trade is that Europe is pretty weak, so it’s hard for exports to get traction,” said Joshua Feinman, global chief economist for Deutsche Bank AG’s asset management unit in New York.

Caterpillar, the world’s largest maker of construction equipment, on April 25 reported a gain in first-quarter revenue that was smaller than analysts estimated after sales fell in China and Brazil. The Peoria, Illinois-based company said demand in developing nations this year will be lower than anticipated, a reversal after growth last year in Latin America and the Asia- Pacific region outpaced North America.

A day earlier, United Technologies said orders from China dropped, while 3M Co forecast lower growth in the country.

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