Washington, March 12 (Bloomberg) -- The U.S. trade deficit narrowed in January from a record as Americans bought fewer foreign-made goods and exports rose, a government report showed. The $41.1 billion trade gap in goods and services followed a revised $44.9 billion deficit in December that was the largest ever, the Commerce Department said. The January shortfall was the second largest on record. In 2002, the deficit reached a record $435.7 billion dollars. Expectations for U.S. growth in 2003 are declining as consumer spending slows and business investment lags. In February, manufacturing slowed, consumer confidence reached a nine-year low and the economy lost 308,000 jobs, the most since the aftermath of the Sept. 11 attacks. Those developments suggest Americans will import fewer goods, keeping the trade deficit from expanding.
``Economic growth worldwide is moribund,'' said Kathy Bostjancic, an economist at Merrill Lynch & Co. in New York, before the report. ``Trade flows aren't going to change dramatically enough to get a quick narrowing of the trade deficit.'' Economists had expected a deficit of $43.4 billion compared with December's previously reported $44.2 billion, based on the median estimate of 60 forecasts in a Bloomberg News survey. Imports fell 2 percent in January to $123 billion. The drop reflected less demand for foreign-made televisions, video recorders, automobiles and commercial aircraft. Imports of autos and parts dropped 4.9 percent to $16.8 billion in January. Americans bought 3.9 percent less in imported consumer goods, and companies spent 1.1 percent less on capital goods such as telecommunications equipment and computers. Oil Prices Rising oil prices helped offset falling imports of other goods. The value of U.S. oil imports jumped in January to $7.4 billion from $7 billion the previous month. The price of oil surged to $27.73 a barrel from $24.15 in December, the biggest increase since October 1990. The nation imported 268.4 million barrels for the month, down from 289.3 million. The decline may have reflected political turmoil in Venezuela, from which imports were the lowest since February 1989. Since then, oil prices have jumped even more because of the prospect of war with Iraq. The April Brent crude-oil futures contract rose 10 percent last month on the International Petroleum Exchange in London. The price reached $34.26 a barrel yesterday, the highest since September 2000. Exports increased 1.6 percent to $81.9 billion in January after falling 2.8 percent the previous month. Shipments abroad of consumer goods climbed 6.9 percent in January to $7.4 billion, led by a surge in pharmaceuticals. Foreign companies bought 2.5 percent more capital goods.
Factory Index
The Institute for Supply Management's January factory index signaled a rebound in exports from the December lull. The group's export index rose to 55.6 in January, the highest since November 1999, from 52.5 in December. A reading greater than 50 signals expansion. The export index held its gains last month, easing to 55.5, suggesting exports rose again last month. Deere & Co., the world's biggest maker of farm equipment, said last month that income in its fiscal first quarter ended in January improved as European demand for tractors rose. The drop in the value of the dollar against the euro helped lift overseas sales by 19 percent, the Moline, Illinois-based company said. Sales of farm equipment in the U.S. and Canada will be little changed this year compared with 2002 because of dry weather, while sales in Western Europe will grow, Deere said. In the past year, the dollar declined 26 percent against the euro and 9 percent against the yen, making American goods less expensive relative to European and Japanese products.
Weaker Dollar
``As the year goes on, the drop in the dollar will help limit the damping effect of trade on the economy,'' said Michael Moran, chief economist at Daiwa Securities America Inc. in New York, before the report. He estimated the January deficit at $42 billion. ``The softer dollar will start to have a dampening effect on imports and give a little push to exports.'' Other economists aren't so sure. The decline in the dollar will probably ``have a minimal effect on trade if any at all,'' Merrill's Bostjancic said. ``The price impact takes a while to filter through, and foreign companies will try to match the price decreases to stay competitive.'' The U.S. economy is expected to grow 2.2 percent from January through March and 2.8 percent in the following three months, according to the latest consensus estimate of economists surveyed by Blue Chip Economic Indicators. Those estimates are down 0.4 percentage point from last month's projections.
Other Economies
Economies of other U.S. trading partners are expanding even more slowly. While the U.S. economy is expected to grow 2.6 percent this year, Japan, the world's second-biggest economy, is seen expanding 0.8 percent, according to the Blue Chip survey. The economy of the 12 nations that share the euro is projected to grow 1.3 percent. ``With the U.S. economy remaining relatively robust internationally, the trade deficit will narrow only gradually,' said Peter Kretzmer, a senior economist at Banc of America securities Inc. in New York, before the report. By region, the Commerce Department reported that the trade deficit with Japan narrowed to $5.2 billion from $7.1 billion. The trade gap with China fell to $9.4 billion from $9.5 billion. The deficit with the Organization of Petroleum Exporting Countries widened to $3.6 billion from $3.2 billion. Elsewhere, the trade deficit with Asia's newly industrialized countries widened to $2.8 billion from $2.3 billion. The deficit with Canada, the largest U.S. trading partner, expanded to $5 billion from $4.6 billion. The gap with Mexico grew to $3 billion from $2.8 billion. The deficit with Western Europe fell to $7 billion from $9.6 billion. //www.quote.bloomberg.com