Feb. Trade Deficit Grows with Consumer Spending

The U.S. trade deficit widened more than expected in February as a small gain in exports to the highest level in 16 months was offset by a bigger jump in imports, reflecting increased demand for consumer goods from televisions to clothing.

The wider deficit was a sign of a rebounding U.S. economy. Economists expect the trade deficit to rise this year but hope that expanding exports will continue to lift the fortunes of American manufacturing companies.

The Commerce Department reported Tuesday that the deficit for February increased 7.4 percent to $39.7 billion. That was larger than the $38.5 billion deficit economists had expected. Exports edged up 0.2 percent while imports jumped 1.7 percent.

The politically sensitive deficit with China fell to $16.5 billion in February, the lowest level in 11 months, but was still the biggest trade imbalance the United States has with any country. The slight improvement was not likely to lessen pressure on the Obama administration to impose trade sanctions on China unless the country begins to allow its currency to start rising again in value against the dollar.

President Barack Obama brought up the currency issue in talks on Monday with Chinese President Hu Jintao, who was in Washington for a nuclear security summit.

Hu, in a statement released in Beijing on Tuesday, rejected U.S. calls for China to allow its currency to rise in value against the dollar. Reforms of China’s currency system “won’t be advanced by any foreign pressure,” Hu said in those remarks.

Hopes for an imminent change in China’s current system of tightly linking the yuan to the dollar had been boosted following a surprise stop last week by Treasury Secretary Timothy Geithner in Beijing for talks with Chinese economic officials on his way back to Washington from India.

Treasury officials said they would have no comment on Hu’s statement Tuesday on the currency issue, pointing reporters to what White House officials had said about the Hu-Obama meeting on Monday.

Jeff Bader, director of Asian affairs on the National Security Council, told reporters that Obama had reaffirmed in the meeting the administration’s view that China needs to move to a more flexible exchange rate as an “essential contribution” to the goal of a sustained and balanced global recovery.

American manufacturers said that Hu’s comments underscored the need for a tougher U.S. approach and called for Congress to pass legislation that would impose trade sanctions on Chinese products unless Beijing moved faster to revalue its currency.

Scott Paul, executive director of the Alliance for American Manufacturing, said the U.S.-China trade deficit has already cost 2.4 million manufacturing jobs, underscoring the urgency to do something.

“The message that President Obama should deliver to China is clear: stop manipulating your currency, stop subsidizing your industries and start opening your markets or there will be consequences,” Paul said in a statement.

The February deficit was the highest since December and followed a revised $36.95 billion imbalance in January.

In the first two months of this year, the deficit is running at an annual rate of $459.9 billion, up 21.5 percent from the $378.6 billion imbalance recorded in 2009. That had been the smallest trade gap in eight years, reflecting the severe U.S. recession that depressed demand for imports.

While imports are expected to rise this year, analysts believe exports will grow as well, reflecting a rebound in the global economy and a weaker dollar, which helps American producers by making their products cheaper in overseas markets.

Analysts saw the higher deficit as a mixed blessing. Paul Ashworth, senior U.S. economist at Capital Economics, said the higher deficit would trim overall economic growth, as measured by the gross domestic product, by about 0.3 percentage point in the January-March quarter, lowering GDP growth to around 3 percent.

But he and other analysts said the rising demand for imports showed that the economy is rebounding. They said higher imports were a good barometer of business sentiment, showing that companies were willing to restock depleted store shelves in an expectation that consumer demand will keep rising.

Obama last month set a goal of doubling exports within five years as a way to create 2 million U.S. jobs. Economists view that target as ambitious but they do think a rebounding global economy and a further decline in the dollar, especially against the Chinese yuan, would help spark demand for U.S. goods.

For February, the small 0.2 percent rise in exports of goods and services pushed the total to $143.2 billion, the highest level since October 2008. Gains were seen in exports of autos and auto parts, industrial engines, semiconductors and civilian aircraft engines.

Imports rose a larger 1.7 percent to $182.9 billion as imports of consumer goods rose to the highest level since October 2008. Increases were recorded in shipments of computers, televisions and other electronic appliances, toys and games and clothing. Imports of all petroleum products rose 1.6 percent to $27.6 billion on a seasonally adjusted basis even though the number of barrels of crude oil imported fell in February to the lowest level in 11 years.

In February, the U.S. deficit with Japan rose to $4.3 billion, a gain of 28.3 percent, while the deficit with the European Union surged by 89.9 percent to $5.3 billion.

MARTIN CRUTSINGER, AP Economics Writer WASHINGTON