- The Washington Times - Friday, April 10, 2009

The U.S. trade deficit plunged unexpectedly in February as the recession pushed imports down for a seventh straight month while exports rebounded a bit. Analysts said the smaller trade gap is fresh evidence the economy's downward spiral may be easing.

The Commerce Department said Thursday the deficit dropped 28.3 percent to $25.97 billion, the smallest gap since November 1999.

Economists, who had expected the deficit to widen slightly in February, said the smaller imbalance was one of many recent indicators signaling that a steep plunge in U.S. economic activity may be leveling off.

Some said the better-than-expected trade performance, along with stronger consumer spending, could lead to a decline in the overall economy of less than 5 percent in the first quarter. That would be an improvement from the 6.3 percent plunge in the gross domestic product recorded in the fourth quarter, the steepest drop since 1982.

“Things are still bad, but less bad than before, which is good in this environment,” said Sal Guatieri, senior economist BMO Capital Markets.

Stronger sales for consumer goods - including pharmaceutical products, autos, food and beverages - led the strength in exports, which posted the first increase after six straight declines. But analysts cautioned against reading too much into the gain.

“The rebound in exports will be temporary because we are still struggling with the fact that the dollar is stronger than it used to be and the world is weaker than it used to be. Both of those factors are going to hurt exports,” said David Wyss, chief economist at Standard & Poor's in New York.

“The U.S. recovery will not be export led,” said Nigel Gault, chief U.S. economist at IHS Global Insight. “Given the weak state of overseas economies, it is too early to be thinking about a sustained export rebound.”

The politically sensitive deficit with China dropped 31 percent to $18.9 billion in February, but remains the largest trade gap with any country. America's deficit with Japan fell to $2.2 billion, the lowest level since December 1984. The deficit with Canada, America's biggest trading partner, dropped to $1.82 billion, the lowest level since December 1998.

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