The U.S. trade deficit widened more than expected in February as a rebound in exports was offset by an increase in imports, the latest indication that economic growth weakened further in the first quarter.
But the growth picture should brighten in the months ahead, with other data on Tuesday showing that activity in the vast services sector picked up in March as new orders rose strongly, and sustained strength in the labor market.
“There are some green shoots appearing this spring in the economic data which makes us more confident that 2016 is going to be a good year after a step-down in expectations and hopes at the start of the year,” said Chris Rupkey, chief economist at MUFG Union Bank in New York.
The Commerce Department said the trade deficit increased 2.6 percent to $47.1 billion in February, worse than economists’ forecasts for a reading of $46.2 billion. When adjusted for inflation, the shortfall rose to $63.3 billion, the largest since March last year, from $61.8 billion in January.
That prompted economists to cut their first-quarter gross domestic product growth estimates by as much as half a percentage point to as low as a 0.4 percent annualized rate.
They see trade subtracting at least seven-tenths of a percentage point from GDP growth in the first quarter, up from 0.14 point in the fourth quarter. The economy grew at a 1.4 percent rate in the final three months of 2015. Though the trade report joined data on consumer and business spending in casting a dark shadow over the economy, the clouds could lift in the coming months.