The trade deficit for February is expected to narrow slightly from the previous month. While purchases of petroleum products will add red ink to the balance sheet, a sharp drop in imports from China could provide deficit relief.
The average forecast in a Bloomberg survey of 70 economists put the deficit at $51.6 billion. The trade gap widened more than expected in both December and January, shooting up to the highest level since October 2008.
The United States imported more oil at higher prices in February. Purchases averaged 8.9 million barrels of oil per day, up from 8.56 million in January, according a report from the U.S. Energy Information Administration. Prices increased from $97.80 at the start of the month to $109.39 on February 24.
At the same time, China’s February trade deficit took observers by surprise, plummeting to $31.5 billion. Exports to the United States were down sharply.
Analysts are still not yet sure what caused the precipitous drop, but it may be due to large one-time purchases.
Recovery in exports to the European Union is unlikely. In January, the trade gap with the 27-member confederation widened to $8.5 billion. Weak demand in Europe may not be a game-changer, as the continent is not as big a source or destination for trade as Asia, said Jonathan Eaton, an economist at Pennsylvania State University.
“Obviously recession in Europe is going to be bad for U.S. exports, but I don’ think it’s really critical,” said Eaton.
Other factors, however, could push up imports.
February’s trade balance report is likely to reflect import trends in January because employment gains were similar. Look for imports of consumer goods and food and beverages to grow or remain steady.
Imports of industrial supplies and materials were also strong in January. This may not hold, as some economists have said businesses may have invested earlier in the year than expected, essentially robbing later months of hiring and purchases.
Last month, car and auto parts imports reached a record $25.3 billion, also due to the improving economy.
Harder to determine is the effect on exports. Exports of capital goods have tracked up steadily over the past two months.
Car and automotive parts exports started the year strong, reaping about $16 billion more in profits than in January last year, according to data from the U.S. Department of Commerce. Sustained growth in February could help the country’s balance sheet.