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U.S. trade deficit widens sharply in January

March 10, 2011|By Greg Robb

Reporting from Washington — — The U.S. trade deficit widened sharply in January to the highest level since the summer, as a surge in imports overwhelmed record levels of exports.

The nation's trade deficit expanded 15.1% in January to $46.3 billion from a revised $40.3 billion in December, the Commerce Department said Thursday.

This is the largest trade gap since June 2010 and also the biggest one-month worsening in the deficit since that same month.

The widening of the deficit was much larger than expected. Analysts surveyed by MarketWatch had expected the deficit to grow to $41.5 billion from the initial estimate of a deficit of $40.6 billion in December.

The trade data, combined with a report on Chinese exports, raised concern among investors that the economy might be slowing.

Economists expected the deficit to widen in January because the price of imported oil has skyrocketed, but the gain in imports was much broader than energy. Imports of autos and consumer and capital goods jumped in the month.

"The combination of acceleration in stockpiling activity to meet stronger domestic demand and [the] price effect from higher commodity prices led to the stronger-than-expected growth in imports," said Aichi Amemiya of Nomura Securities.

Excluding the effect of inflation, the deficit in real terms rose 7.5% to $49.51 billion in January.

The January report suggests that trade will be a drag on growth in the first quarter. Just how much depends on data in the next two months.

Capital Economics chief economist Paul Ashworth said the report wasn't necessarily a disaster to the extent that the surge in imports reflects strong domestic demand and restocking of store shelves.

"Nevertheless, it is a concern, particularly when we know that the latest surge in the cost of imported oil will drive the deficit about $50 billion over the next few months," Ashworth said.

The surge in imports in January obscured the fact that exports rose 2.7% to a record $167.7 billion in January.

Last year, President Obama set a goal of doubling U.S. exports by 2015, and exports are so far exceeding this pace.

But the U.S. consumer appetite for imported goods shows no signs of abating. Imports rose 5.2% to $214.1 billion in January. This is the largest increase in almost 18 years. Imports are on pace to set a new record by sometime this summer, economists said.

The U.S. trade deficit with China widened to $23.27 billion in January from $18.30 billion in the same month last year and $20.68 billion in December.

Imports from China rose 1.8% to $31.35 billion in January while exports fell 20.2% to $8.08 billion.

The White House, Federal Reserve and Congress have been pushing China to allow its currency to appreciate at a faster pace.

Earlier Thursday, China unexpectedly posted a trade deficit in February, according to official data, and economists said this could reduce pressure on the country's exchange rate policy.

Ashworth said the data for both months showed that Chinese manufacturers rushed shipments to the U.S. ahead of the Chinese New Year holiday.

In a separate report, the Labor Department reported that initial jobless claims rose 26,000 to 397,000 in the latest week.

Robb writes for MarketWatch.com/McClatchy.

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