US trade deficit widens as exports slow

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The United States trade deficit probably widened in March as imports rebounded from the biggest setback in three years, economists said before a report this week.

The gap grew to $50 billion from $46 billion in February, according to the median forecast of 62 economists in a Bloomberg News survey taken ahead of a Commerce Department report set for May 10. Other data may show wholesale prices, the cost of imports and consumer sentiment were little changed.

Companies probably bought more goods from abroad, reflecting higher fuel prices and a bounce back in shipments from China following the Lunar New Year holidays. At the same time exports may fail to keep pace as a slower global expansion hurts sales at companies such as Caterpillar Inc and United Technologies Corp, indicating the US economy won't be able to count on an improving trade account to boost growth.

"We expect the oil-import bill to soar," said Paul Edelstein, director of financial economics at IHS Global Insight in Lexington, Massachusetts. "We expect foreign trade to be a drag on growth for the year."

Purchases of foreign goods decreased by 2.7 percent in February, the biggest drop since February 2009, Commerce Department figures showed last month. Imports from China plunged 18 percent as the week-long Lunar New Year holiday extended into early February. That slump was probably reversed in March, Edelstein said, widening the trade gap.

More-expensive petroleum may also have contributed to the gains. The price of foreign crude oil climbed 3.5 percent in March, according to figures from the US Labor Department.

Fuel prices probably retreated last month, helping to restrain inflation from overseas. The cost of imported goods dropped 0.2 percent in April after jumping 1.3 percent the prior month, according to the median estimate of economists surveyed before the Labor Department's update on May 10.

A slowdown in hiring may restrain the wage growth needed to fuel US consumer spending, which means imports may keep slowing this quarter. Payrolls climbed by 115,000 workers in April, the smallest increase in six months, Labor Department figures showed last week. The jobless rate fell to a three-year low of 8.1 percent as people left the labor force, adding to worries that the economic expansion is cooling.

After reaching a record in February, US exports may also slow as economies from Europe, to China and Brazil decelerate.

In Europe, the debt crisis is curbing demand for goods as governments from Spain to Italy are forced to step up spending cuts. Euro-region unemployment rose to a 15-year high in March and manufacturing contracted in April, reports showed last week.

"The negative for trade is that Europe is pretty weak so it's hard for exports to get traction," said Joshua Feinman, global chief economist for Deutsche Bank AG's asset management unit in New York.

Caterpillar, the world's largest maker of construction equipment, on April 25 reported a gain in first-quarter revenue that was smaller than analysts estimated after sales fell in China and Brazil. The Peoria, Illinois-based company said demand in developing nations this year will be lower than anticipated, a reversal after 2011 growth in Latin America and the Asia-Pacific region outpaced North America.

In addition, United Technologies said orders from China dropped while 3M Co forecast below-trend growth in the country.

Slowing global growth has hurt shares of equipment makers. The Standard & Poor's Supercomposite Machinery Index, which includes companies such as Caterpillar, Deere & Co and Eaton Corp, is down 3.8 in the two months through April. That compares with a 2.4 percent gain for the broader S&P 500 Index over the same period. The S&P 500 dropped 1.6 percent to 1369.1 at the May 4 close in New York, capping its worst week this year on the disappointing payroll figures.

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