By Josh Newell

WASHINGTON (MNI) – The U.S. trade deficit is expected to narrow
slightly in February, as exports are forecast to rise at a faster pace
than imports, even as oil prices continue to tick up.

While both exports and imports should grow, imports are expected to
show somewhat weaker gains, some of which is due to the Chinese New
Years — which contributed to a $3.2 billion trade deficit for China in
February.

The U.S. trade deficit is estimated to come in at $51.8 billion
according to a survey of economists by MNI. This would be down slightly
from a $52.6 billion deficit in January.

After being somewhat below trend the previous two months, exports
are forecast to grow strongly, causing economists to highlight a variety
of sectors for potential growth.

Michael Englund, chief economist for Action Economics, told MNI in
a phone interview that, “Generally it looks like a strong gain. We don’t
have a real standout in exports except for maybe consumer goods. They
can be volatile and have fallen pretty substantially the last two
months, so a reversal to trend is likely.”

Englund also pointed to stronger auto components translating to
strong exports and imports, “boosting overall trade volume.”

Motor vehicle retail sales grew 1.6% in February, after falling by
the same rate the prior month, according to the U.S. Census Bureau.

Kenneth Mayland, President of ClearView Economics agreed with the
positive forecast, telling MNI, “The export growth in the prior two
months was a little light, so I expect a reversion to trend.”

“Capital spending, some materials like chemicals, and some
agriculture goods should all show growth.”

The Institute for Supply Management’s manufacturing report showed
accelerated export growth for February, rising 4.5 points to 59.5, while
the non-manufacturing index remained several points above 50 as well,
illustrating growth.

Meanwhile, the ISM manufacturing and non-manufacturing import
indexes also reported growth, as both indexes remained above 50.

“Both sides of the trade ledger are growing”, said Jonathan Basile,
Economics Director at Credit Suisse, told MNI.

Basile forecasts imports to grow faster than exports, translating
into a slight widening of the trade gap, saying “Due to diverging growth
among emerging economies and the US, our imports are outperforming our
exports. This isn’t a bad sign because it means strengthening consumer
demand.”

He cited recently rising oil prices as the main factor that should
push imports up.

According to data from the Bureau of Labor Statistics, import
prices for petroleum rose 0.4% in February, the first increase in three
months.

Action Economics’ Mike Englund agreed that petroleum prices were
rising but did not agree that this would cause oil imports to go up,
saying “essentially oil prices likely rose, but we are looking for a 4%
drop in volume. So total oil imports should be net down slightly.”

One other factor that could affect overall trade, especially
imports, is the fact that the Chinese New Year fell on February.

As MNI pointed out in a recent Reality Check, China’s exports were
especially weak in February, and largely because of this U.S. ports
reported weaker import volumes.

Englund agreed with this assessment saying, “Chinese New Year in
February tends to narrow our deficit. Export growth should be about
flat, but imports from China should fall.”

Whether this is completely picked up by the seasonal adjustments,
is another, more ambiguous question.

The Department of Commerce will release the trade balance report
Thursday at 8:30 a.m. ET.

–Joshua Newell is a reporter for Need to Know News in Washington

** MNI Washington Bureau: 202-371-2121 **

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