U.S. Trade Deficit Grows Unexpectedly By 5.7pct

Washington, D.C. (AHN) - The trade gap in U.S. unexpectedly widened for the month of February due to an increase in automobile import and decline in oil demand, while a surge was noted in machinery exports.

The trade deficit jumped by 5.7 percent to $62.3 billion, compared to the revised figure of $59 billion for the month of January, according to the Commerce Department's report in Washington on Thursday.

The report attributed the widening gap to the 3.1 percent to $213.7 billion in the overall imports led by the number of foreign cars, while the report noted a surprise decrease in the petroleum as well as the products imported from China.

The imports of crude oil declined to 286.5 million barrels worth $24.3 billion, compared to 322.2 million barrels in January valued at $27.1 billion.

The deficit with China dropped to $18.4 billion in February, compared to $20.3 billion in January, due to the decline in the consumer and business spending on the foreign products including computers, mobile phones and clothing.

According to the market analysts, the deficit is likely to fall during 2008 due to several factors including reducing consumer confidence as the dollar weakens against major international currencies and the oil prices continues to hit new records.

The U.S. dollar declined against Japanese currency to 100.60 yen per dollar, after it was registered at 102.34 yen in New York late Wednesday.

The U.S. dollar also weakened, falling below 7-yuan mark against the Chinese currency to 6.99 yuan per U.S. dollar.

Meanwhile, a light sweet crude oil barrel for May delivery remained over $111 mark by 0.7 percent to $111.65 on the New York Mercantile Exchange during early morning trading session on Thursday.

Prices had touched more than $112 a barrel mark in electronic trading on Wednesday to a record $112.21 a barrel after it closed in New York trading on at a price of $110.87 a barrel.

"The increase in imports will not hold up," Jay Bryson, global economist at Wachovia Corp. in Charlotte, North Carolina, told Bloomberg news report.

"Growth is so weak we are not going to be buying as much. We'll see the trade deficit improving. Exports seem to be holding up well, reflecting a weaker dollar and strong growth in the rest of the world," Bryson said.

Exports climbed up by 2.0 percent to $151.4 billion, a continuous grown since April 2007, compared to $148.4 billion in February.

The demand in exports was led by vehicles, food, oils and corn, while the products like semiconductors, communications equipment and consumer goods dropped.

"We expect a reversal of the numbers soon as households continue grappling with falling home prices, plunging payrolls and financial market turmoil," Dimitry Fleming, an economist at ING Bank, in a note to clients, told The New York Times news report.

According to the Labor Department report released in Washington on Thursday, the initial claims filed dropped by 52,000 to 357,000, which is recorded as a highest drop in a week since September 2005.

While, the jobless individuals continuing to receive unemployment insurance increased by 3,000 to 2.940 million, which is more than the market analysts' projection of 2.915 million claims, for the week ending in March 29.