Washington, Feb. 20 (Bloomberg) -- The U.S. trade deficit probably narrowed in December from a record gap and Philadelphia- area manufacturing likely expanded in February for a fourth month, economists said in advance of government reports today. A $38.7 billion deficit in goods and services was likely during the month as the demand for foreign-made goods slowed after a record $40.1 billion gap in November, based on the median of 64 forecasts in a Bloomberg News survey. A reading of 10.0 is forecast for the Philadelphia Federal Reserve's index of factory activity after January's 11.2. Imports probably slowed after flooding into the country in November when West Coast ports resumed operations after a labor dispute the previous month that temporarily closed docks. A narrower trade deficit adds to economic growth and the decline in December may mean gross domestic product was faster in the fourth quarter than first estimated.
The return to work at West Coast docks ``blew out imports in November and you just aren't going to have that big a surge'' in December, said Jay Bryson, chief international economist at Wachovia Corp. in Charlotte, before the report. Still, ``the rise in oil prices is going to constrain any sort of big turnaround'' in imports. Higher fuel prices probably pushed up producer prices by 0.5 percent in January, according to the median of 65 forecasts in a Bloomberg News survey. Excluding energy and food, the core producer price index probably rose 0.1 percent after a 0.5 percent decrease in December. The Labor Department is scheduled to release the price report and statistics on first-time jobless claims at 8:30 a.m. Washington time. The Commerce Department will report the trade figures at 8:30 a.m. The Philadelphia Fed's survey is due at noon.
Economic Growth
Because the U.S. imports more than it exports, imports were probably more affected by the port shutdown. The December trade number will help provide a clearer picture of the economy's performance last quarter. The government assumed the December gap would be about the same as the November deficit when it released the advance estimate for fourth-quarter gross domestic product, the value of all goods and services produced in the country, last month. The narrower shortfall, together with stronger-than-expected sales, inventory and construction figures released since then, suggest the economy grew at a 1.7 percent annual rate in the last three months of 2002, said economists at UBS Warburg LLC in a report. That's a full percentage point stronger than the advance estimate. The revised growth numbers are released next week.
Energy Costs
The expected slowing in imports will be tempered by rising petroleum prices that will bump up the value of oil imports, economists said. The prospect of war with Iraq and a strike in Venezuela caused imported petroleum prices to rise 6.2 percent in December, according to the Labor Department. Foreign oil costs jumped another 12.4 percent in January, suggesting the value of imports resumed rising last month, economists said. Faster growth in the U.S. compared with its trading partners is one reason economists expect imports will stay strong, keeping the trade deficit elevated. The U.S. economy is expected to grow 2.7 percent this year while Japan, the world's second-biggest economy, is seen expanding 0.7 percent, according to consensus estimates of economists polled by Blue Chip Economic Indicators this month. The economy of the 12 nations that share the euro as their common currency is projected to grow 1.4 percent//www.quote.bloomberg.com