The U.S. trade deficit plunged unexpectedly in February as the recession pushed imports down for a seventh straight month while exports rebounded a bit. Analysts said the smaller trade gap is fresh evidence the economy’s downward spiral may be easing.
The Commerce Department said Thursday the deficit dropped 28.3 percent to $25.97 billion, the smallest gap since November 1999.
Economists, who had expected the deficit to widen slightly in February, said the smaller imbalance was one of many recent indicators signaling that a steep plunge in U.S. economic activity may be leveling off.
Some said the better-than-expected trade performance, along with stronger consumer spending, could lead to a decline in the overall economy of less than 5 percent in the first quarter. That would be an improvement from the 6.3 percent plunge in the gross domestic product recorded in the fourth quarter, the steepest drop since 1982.
“Things are still bad, but less bad than before, which is good in this environment,” said Sal Guatieri, senior economist BMO Capital Markets.
Stronger sales for consumer goods — including pharmaceutical products, autos, food and beverages — led the strength in exports, which posted the first increase after six straight declines. But analysts cautioned against reading too much into the gain, which they said likely was a blip given sustained weakness in the global economy.
“The rebound in exports will be temporary because we are still struggling with the fact that the dollar is stronger than it used to be and the world is weaker than it used to be. Both of those factors are going to hurt exports,” said David Wyss, chief economist at Standard & Poor’s in New York.
“The U.S. recovery will not be export led,” said Nigel Gault, chief U.S. economist at IHS Global Insight. “Given the weak state of overseas economies, it is too early to be thinking about a sustained export rebound.”
The politically sensitive deficit with China dropped 31 percent to $18.9 billion in February, but remains the largest trade gap with any country. America’s deficit with Japan fell to $2.2 billion, the lowest level since December 1984. The deficit with Canada, America’s biggest trading partner, dropped to $1.82 billion, the lowest level since December 1998.
For the first two months of this year, the deficit is running at an annual rate of $373 billion, about half of the $681.1 billion imbalance recorded in 2009, according to the Commerce Department.
Economists expect the trade gap could remain at low levels for the rest of 2009. That’s based on forecasts that the recession will not end until late this year and any rebound will be muted, further depressing consumer demand.
For February, imports of goods and services fell 5.1 percent to $152.7 billion, the seventh consecutive monthly drop. A 16.3 percent plunge in imports of crude oil to $10 billion, the smallest monthly total since April 2004, led the overall decline. The average price of a barrel of crude fell to $39.22.
Imports of consumer goods, from autos to toys and games, furniture, clothing and televisions, all dropped sharply in February.
But exports of goods and services posted an unexpected rebound in February, rising 1.6 percent to $126.76 billion. Even with the slight increase, exports are 16.9 percent below year-ago levels as American manufacturers struggle with slumping demand at home and overseas.
Stronger sales of farm products, manufactured goods and autos in February helped offset a big drop in shipments of commercial aircraft.
Big exporters such as Boeing Co. and Caterpillar Inc. have been forced to slash jobs because of the weak global economy. More than 75 percent of Boeing’s orders last year came from outside North America while 60 percent of Caterpillar’s heavy machinery sales are overseas.
President Barack Obama and other leaders of the Group of 20 nations, meeting in London last week, agreed to increase the resources of global lending institutions to help bolster the finances of poorer nations so they can continue to import products.
The G-20 nations also pledged again to refrain from erecting protectionist barriers, a promise they hope will prevent the current global downturn from following the path of the Great Depression, when countries worsened the slump by shutting down global trade.
The pledge was a repeat of a similar commitment the G-20 leaders made after their first summit meeting last November. Since that time, 17 of the countries, including the U.S., have raised trade barriers.
Copyright 2009 The Associated Press.