Instant View: Trade gap widens in February

NEW YORK (BestGrowthStock) – A jump in imports of consumer goods and other products widened the U.S. trade gap in February to $39.7 billion, but the closely watched bilateral deficit with China was its lowest in nearly a year, a government report showed on Tuesday.

KEY POINTS: * Stronger U.S. demand boosted imports 1.7 percent during the month to $182.9 billion. Exports edged only 0.2 percent higher to $143.2 billion, but that was still the best showing since the depths of the global financial crisis in October 2008. * Analysts had expected the trade deficit to widen in February to around $38.5 billion. The Commerce Department lowered its estimate of January’s gap slightly to $37.0 billion. * U.S. imports of consumer goods such as pharmaceuticals, electronics, toys and clothing and foreign services such as travel were the highest since October 2008. Imports of industrial supplies and materials were the highest since November 2008.

COMMENTS:

TIM GHRISKEY, CHIEF INVESTMENT OFFICER, SOLARIS ASSET MANAGEMENT, BEDFORD HILLS, NEW YORK:

“Trade balance a little bit worse than expected, but probably not a major number there. The import prices actually better than expected, perhaps reflecting the recent strength in the dollar, so a little bit less inflation on the import side which continues to show this economy is certainly not gripped by inflation and is another indication the Fed will remain on the sidelines here. The Fed does not want to upset this recovery by any means, nor do that want to interfere with what we believe will be pending acceleration in some job growth. Through the election we expect them to remain on the sidelines.”

MARC PADO, U.S. MARKET STRATEGIST, CANTOR FITZGERALD & CO., SAN FRANCISCO:

“The import price index for the month is up 0.7 (percent), we were looking for up 1 percent, so not a big difference there.

“Obviously when you look at the import prices they are heavily weighted with a lot of the energy type stuff. The dollar has been very volatile lately, too, which I think is a component to what we’re seeing here, but well within the range of a normal report after a lot of extremes that we saw in late ’08, early ’09. We’re getting back to something that’s more traditional, small movements, higher prices for fuel that obviously had a part to do with it as well.

“The focus is on earnings, that’s the main thing that everybody is concerned about.”

SCOTT BROWN, CHIEF ECONOMIST, RAYMOND JAMES, ST. PETERSBURG, FLORIDA:

TRADE BALANCE: “There are no real surprises. It’s consistent with a gradual economic recovery. Exports are a little weaker than expected.”

IMPORT/EXPORT PRICES: “You saw the increase in petroleum prices. You have seen increases in imported commodities but prices on imported finished goods are still pretty low.”

“This could put a little bit of a squeeze on U.S. manufacturers because their costs are going up but they can’t raise prices as much.”

TOM PORCELLI, U.S. ECONOMIST, RBC CAPITAL MARKETS, NEW YORK:

“The net result is there are no surprises. We looked for the trade deficit to deteriorate and that’s exactly what happened. The rise in imports is driven by key factors, not the least of which were crude oil and pharmaceuticals.

“On the export side there’s a mixed story. As we look at the subcomponents we see a very mixed story.

“From a market perspective I think there’s going to be a very limited reaction to these numbers.”

OWEN FITZPATRICK, HEAD OF U.S. EQUITY GROUP, DEUTSCHE BANK PRIVATE WEALTH MANAGEMENT, NEW YORK:

“(Trade data) was a little bit worse than expected, kind of in line. That’s not surprising. Relative to other data, it’s not weighted as heavily (by stock investors)…I think Alcoa is going to rule the day to some extent.”

CARY LEAHEY, ECONOMIST, DECISION ECONOMICS, NEW YORK:

“The trade deficit was a little wider than expectations. People have been raising their first quarter GDP forecasts toward 4 percent so this takes a little bit of a shine off that. There is a pickup in the underlying economy, but the trade report suggests that more of the benefit may have gone to overseas production rather than domestic production.”

LOU BRIEN, MARKET STRATEGIST, DRW TRADING, CHICAGO:

“It’s a little higher-than-expected so it should mean a little less for GDP. There is a bit of an uptick in bonds, but the market is pretty quiet.”

MARKET REACTION: STOCKS: U.S. stock index futures hold losses BONDS: U.S. Treasury debt prices hold slight gains DOLLAR: U.S. dollar little changed after data

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Instant View: Trade gap widens in February