Trade deficit narrows on near-record exports

A near-record level of exports helped shrink the nation’s trade deficit in March as the global economy shows signs of strengthening.

The gap narrowed by 3.6 percent to $40.4 billion from February’s $41.9 billion, which was the largest deficit in five months, the Commerce Department reported Tuesday.

{mosads}Exports rode the largest gain in nine months to their second-highest level ever posted, adding to a growing batch of data that shows global demand was picking up and that the U.S. economy was emerging from winter’s grip heading into the second quarter.

Exports were boosted 2.1 percent to $193.9 billion and records were set with Canada and South Korea.

An increase in domestic energy production also is expected to help boost U.S. exports.

Imports also increased but at a slower pace, up 1.1 percent to $234.3 billion on greater cellphone and clothing purchases.

A slowdown in trade knocked off 0.8 percentage point from growth in the first three months of the year — gross domestic product was a paltry 0.1 percent in the first quarter — as the economy went into a deep freeze over the winter.

But economists are expecting growth to pick up pace in the second quarter as warmer weather kicks in and consumers release their pent-up demand.

The deficit with China fell 2.2 percent to to $20.4 billion from $20.9 billion, which is easily the largest imbalance with any country. 

Congress and business groups have pressed the Obama administration to be tougher on the Chinese government to let the value of their currency, the yuan, rise at a faster pace against the dollar. 

Lawmakers continue to argue that the trade deficit is fueled by currency manipulation practices that are giving China an unfair advantage on the world’s trading stage.

The report also showed that the gap with the European Union rose sharply by 26.7 percent to $11.5 billion even though exports to Germany were the strongest since October 2008.

Although exports hit a record high with Canada but the gap rose 3.7 percent to $2.2 billion.

The deficit also increased with South Korea by 21.1 percent to $1.26 billion from $1.04 billion.