Reuters | By Doug Palmer
WASHINGTON - The U.S. trade deficit registered its largest month-to-month gain in at least nine years in March, powered by record demand for imported consumer goods, the U.S. Commerce Department said on Friday.
The trade shortfall rose 16 percent to $31.2 billion in March from $26.9 billion in February, which was the lowest figure since December 1999, the department said.
While exports dipped, much of the month-to-month rise in the deficit reflected higher imports, which rose to $120.6 billion in March from $117.2 billion in February.
Analysts said the wider-than-expected trade gap, in concert with other recent data, would force the department to lower its estimate that the U.S. economy grew at a 2 percent annual rate in the first quarter. However, they doubted the United States would slip into recession.
"With all the other revisions we've got since then, we think GDP was 1.3 percent," said Ethan Harris, economist at Lehman Brothers in New York. Others expect the Commerce Department to say the economy grew at a 1.5 to 1.7 percent pace when it issues a revised first-quarter estimate on May 25.
While the trade report suggested the economy was weaker than earlier thought at the start of the year, economists said it augured better times ahead, with the import number indicating consumers have not been scared into snapping their pocketbooks shut.
The big surprise was a 12-percent increase in imports of consumer goods like toys, clothes and sporting equipment to $2.8 billion in March, on the heels of an 8 percent drop in that category in February.
"The most important contribution from this report is that it shows consumers are not being scared out of spending," said Paul Christopher, economist with A.G. Edwards and Sons.
Behind the overall numbers, the report showed double-digit increases in imported gems and other luxury goods like collector coins, pleasure boats and stereos.
"So it looks like consumers are regaining some confidence," Christopher said.
On the down side, lower-than-expected exports of $89.5 billion in March, down 1 percent from the previous month, offered evidence other countries are struggling.
"Not only is the U.S. economy slowing, but economies overseas in Europe and Asia as well," said Sung Won Sohn, chief economist with Wells Fargo Bank.
Meanwhile, one Democrat member of Congress said the higher deficit would make it difficult for President Bush to achieve one of his top legislative priorities -- winning authority to negotiate new trade agreements.
"The deficit numbers are the reverse of what he needs to sell his trade expansion plan to Congress," said Rep. Sherrod Brown of Ohio.
But looking ahead, Wells Fargo Bank's Sohn said he expected U.S. economic growth to pick up in the second half of the year, helping to lift foreign economies out of their doldrums.
"I think the U.S. economy once again will be the locomotive pulling the rest of the world," he said.
David Roberts, senior international economist at Banc of America Securities, also saw better days ahead.
"The pickup in imports is line with the sense we had that the slowdown in the U.S. economy is close to its bottom," he said. "We continue to see a U.S. economy that is growing slowly, but definitely growing."
The United States' bilateral deficits widened with countries in every major region.
The nation posted a record deficit with Mexico of $2.8 billion in March, nearly double the February shortfall of $1.46 billion. The monthly deficit with China climbed to $5.74 billion in March from $5.07 billion in February.
The gap with Japan widened to $6.23 billion in March from $6.13 billion a month earlier and the deficit with Western Europe -- despite record U.S. exports to that region -- swelled to $4.66 billion in March from $3.33 billion in February.Reuters:
