Commerce Department Likely To Report Widening Trade Deficit For February (WFC)

According to a report by Bloomberg, economists said, before a report by the Commerce Department due at 8:30 a.m., that U.S. trade deficit increased for the month of February due to increase in imports , adding to the evidence that the U.S. economy has started to recover. According to a median forecast of 73 economists by Bloomberg, the gap increased to $38.5 billion from $37.3 billion reported in the previous month. As there is a need to replenish inventories and with consumer spending rising, purchase of goods and services will rise in coming months. The report also states that U.S. exports will also rise as global economy has started to gain momentum.

Jay Bryson, a global economist at Wells Fargo Securities (NYSE: WFC) in Charlotte, North Carolina, said, “We’re starting to see some strength in imports, with decent retail sales figures and oil prices rising.” He also added that, “Strong growth in Asia will continue to help exports.” The Commerce Department’s report on these figures is due at 8:30 a.m. in Washington. Economists are forecasting the deficit range to be from $35.8 billion to $ 41.6 billion. According to survey median, Labor Department figures may show that import prices, after declining in the previous month by 0.3%, rose by 1% in March. Meanwhile, the price of crude oil on the New York Mercantile Exchange averaged at $81.29 a barrel in March, up from $76.45 a barrel in February.

After witnessing a slack demand due to a subdued economy last year, companies are refilling inventories, boosting demand for foreign-made materials. Meanwhile, improving economy has generated 162,000 jobs in March, the highest figure in the last three years. As a result, consumers are spending more freely. Spending on imported cars and foreign made television will continue to lift imports.

U.S. stocks too have started to climb on signs of economic recovery. The Standard and Poor’s 500 index has gained 7.2 % since the beginning of March. It is up by 77% after plummeting to a 12-year low on March 9, 2009. Growing demand for U.S. goods in Asia and Latin America is also boosting U.S. exports. Cheaper dollar is also helping U.S. exporters to be more competitive in foreign markets. Since March last year, there has been an 11% drop in the U.S. dollar against a trade weighted basket of currencies. President Barack Obama believes that the U.S. economy should focus on expanding exports and investments rather than depending on domestic consumer spending.