Ahead of the Bell: US trade gap

WASHINGTON (AP) -- The U.S. trade deficit likely widened in February for a second consecutive month, reflecting a rising foreign oil bill.

Economists expected the deficit to climb slightly to $44.6 billion in February, an increase of 0.5 percent from January, according to a survey by FactSet. The Commerce Department will release the report at 8:30 a.m. EDT Friday.

In January, the deficit increased by a sharp 16.5 percent to $44.4 billion, as U.S. exports fell, reflecting declines in sales to Europe, China, Japan and Brazil. Imports were up in January, led by a sharp rise in oil imports.

Even with the wider deficits, economists expect the deficit this year will narrow slightly, in part because of continued gains in U.S. energy exports. A narrower trade gap boosts growth because it means U.S. companies are earning more from overseas sales while U.S. consumers and businesses are spending less on foreign products.

The deficit for all of 2012 totaled $539.5 billion, a drop of 3.6 percent from 2011.

U.S. exports had jumped to a near-record high in December, a surge that helped the economy grow slightly in the fourth quarter.

The economy as measured by the gross domestic product grew at an annual rate of 0.4 percent in the October-December quarter. Economists believe economic growth strengthened even more in the January-March quarter to growth of around 3 percent.

Economists see the trade picture brightening further in 2013, helped in part by an energy production boom in the United States and by stronger growth in some major export markets. That forecast is based on an assumption that the European debt crisis will stabilize, helping boost exports to that region and that growth in Asia will rebound further. However, that expectation has been clouded in recent weeks by the flare-up of financial problems in Cyprus.

For all of 2012, the politically sensitive trade deficit with China increased to $315.1 billion, the largest imbalance ever recorded with a single country.

The high deficits with China could add pressure on the Obama administration to take a harder line on China's trade practices. Some U.S. manufacturers contend that China keeps the value of its currency artificially low to make its exports to the U.S. cheaper.

Treasury Secretary Jacob Lew traveled to Beijing last month on his first foreign trip since taking over the Treasury job from Timothy Geithner. Lew discussed a variety of trade issues including currency, copy-right piracy and computer hacking. In his talks with the Chinese, Lew drew a distinction between criminal cyberattacks, which are a common threat, and spying by state-sponsored enterprises. The White House has called on Beijing to take action to stop computer attacks aimed at stealing company secrets.

Production of oil and natural gas has been rising in the United States because drillers have learned to tap once-inaccessible reserved trapped in shale formations. New techniques such as horizontal drilling and hydraulic fracturing, or fracking, have made this possible.

Increased production has lowered U.S. prices of crude oil and natural gas, which refiners use to make gasoline, diesel and other fuels. Crude in the U.S. has been selling for $20 per barrel cheaper than international crude. With lower input costs, U.S. refiners are making enormous amounts of petroleum-based fuels and selling them on the international market at a huge profit.

Source: http://news.yahoo.com/ahead-bell-us-trade-gap-112038213.html

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