By Ruth Mantell, MarketWatch –
WASHINGTON — The U.S. trade deficit narrowed in February for the largest percentage drop since May 2009, according to a government report released Thursday that led analysts to raise estimates for first-quarter economic growth.
The deficit measuring the difference between the nation’s imports and exports hit $46 billion in February, compared with $52.5 billion in January — a 12.4 percent drop, according to the Commerce Department.
Exports and imports are an important component of U.S. gross domestic product, and deficits subtract from growth. Following the report, economists polled by MarketWatch upwardly revised their estimates for first-quarter GDP growth to an annual rate of 2.3 percent from a prior consensus forecast of 2 percent.
“Net trade wasn’t as large a drag on GDP growth in the first quarter as previously looked likely. Annualized first-quarter GDP growth may have been nearer to 2.5 percent than our previous estimate of 2.0 percent,” said Paul Dales, senior U.S. economist at Capital Economics.
“Even assuming partial rebounds in March, it now seems trade will be less of a hit on first-quarter growth than we previously expected,” added Ian Shepherdson, chief U.S. economist at High Frequency Economics.
The Commerce Department reported that overall exports rose 0.1 percent in February to $181.2 billion, while imports fell 2.7 percent to $227.2 billion.
Economists had expected the trade gap to narrow due to holiday-related variations from the Chinese New Year.
“The decline in imports was almost certainly supply-related. The Chinese lunar New Year, which spilled into early February this year, idled Chinese factories that produce goods for U.S. markets,” said Paul Edelstein, IHS Global Insight’s financial economics director.
But the decline went beyond economists’ expectations for a deficit of $51.2 billion in February, compared with the government’s prior January estimate of $52.6 billion.
The trade deficit with China narrowed by 26 percent in February, hitting $19.4 billion, compared with $26 billion in January. The trade gap with the European Union also narrowed, to $5.9 billion in February from $8.5 billion in January.
Elsewhere Thursday, the U.S. Labor Department reported that the number of Americans who applied last week for jobless benefits rose to the highest level in two and a half months.
