The U.S. trade deficit unexpectedly rose for a second straight month in February as a big jump in imports of foreign-made cars offset the first decline in oil imports in a year.
The Commerce Department reported Thursday that the trade deficit rose by 5.7 percent in February to $62.3 billion, the highest level since November. Analysts had forecast that the deficit would decline, believing that a severe economic slowdown in the United States would cut demand for imports.
However, imports of goods and services shot up 3.1 percent to an all-time high of $213.7 billion, reflecting a big surge in imports of foreign cars. Exports also set a record, rising by 2 percent to $151.4 billion, reflecting strong gains in the sale of American-made heavy machinery, computers and farm goods.
In other economic news, the number of newly laid off workers filing claims for unemployment benefits fell sharply last week after having hit the highest level in more than two years in the previous week. The Labor Department said that applications for jobless benefits totaled 357,000 last week, down by 53,000 from the previous week, but the four-week average moved to the highest level since October 2005.
Meanwhile, the nation’s retailers reported mixed results in March. Wal-Mart and Costco Wholesale Corp. were among the best performers. Other retailers reported that their sales suffered from the weak economy and an early Easter that dampened clothing sales.
On Wall Street, investors were generally encouraged by the batch of economic reports and pushed stocks higher after two days of losses.
The rise in the trade deficit gave ammunition to critics who contend that the Bush administration’s policies have helped lose more than 3 million manufacturing jobs since January 2001, as the trade deficit set records for five consecutive years.
“Wages are falling and the middle class is shrinking because of trade deficits,” James Hoffa, president of the International Brotherhood of Teamsters, said Thursday at the end of a three-day “Working Class Convoy for Change” in Pennsylvania.
Hoffa, who is supporting the presidential candidacy of Democratic Sen. Barack Obama, was touring Pennsylvania ahead of that state’s April 22 presidential primary to highlight job losses and financial devastation that his union attributes to unfair foreign competition.
Trade is shaping up as a key issue in the upcoming presidential campaign and in the fight for control of Congress. Republicans contend that free trade is boosting U.S. export opportunities, while Democrats contend that Republicans have not done enough to protect American workers from unfair foreign competition.
Bush sent Congress a free trade agreement with Colombia on Monday, using authority which would require Congress to act on the measure within the next 90 legislative days. But House Speaker Nancy Pelosi was set to get the House to vote to suspend the fast-track process, contending that the Colombia deal cannot be approved until lawmakers are satisfied that the country has done enough to halt violence against union organizers.
For the first two months of this year, the trade deficit is running at an annual rate of $727.6 billion, up from last year’s deficit of $708.5 billion, which had been the first decline in the deficit after five consecutive annual records.
Analysts, who believe the country has fallen into a recession, expect the trade deficit will decline again this year as slumping demand in this country cuts into imports while a weak dollar against other currencies boosts sales of American products overseas.
For April, the politically sensitive deficit with China dropped by 9.6 percent to $18.4 billion, the lowest imbalance in a year. The improvement reflected big declines in imports of computers, cell phones and other telecommunications equipment, and clothing. Even with the decline, the U.S. deficit with China remained the largest with any country. The next highest deficit was an imbalance of $6.9 billion with Japan.
The deficit with Saudi Arabia totaled $3.5 billion, while the imbalance with all OPEC nations totaled $13.2 billion.
America’s foreign oil bill fell 5.7 percent to $37.7 billion. It was the first decline since February 2007 and occurred even though the average price for imported crude oil hit a record of $84.76 in February. With crude oil prices hitting record highs on the spot market above $100 per barrel, analysts believe the petroleum bill will resume rising in coming months.
The deficit with the European Union rose to $6.9 billion in February, up 13.5 percent from January, even though U.S. exports to Europe hit an all-time high, reflecting the fact that a decline in the dollar to record lows against the euro has boosted the price competitiveness of American products.