Trade deficit declines in February

WASHINGTON – Economists raised their forecast for first-quarter economic growth after news Thursday of an unexpectedly big drop in the nation’s trade deficit.

The Commerce Department reported the trade deficit narrowed in February to $46 billion from $52.5 billion in January. Most of the decline was due to a sharper-than-expected 2.7 percent falloff in imports, much of that from China. U.S. exports in February were up a tiny 0.1 percent.

Analysts said the trade gap was likely to turn up in March as Chinese production and shipments resumed after the Lunar New Year holiday in February.

For now, the smaller deficit suggests a significantly bigger economic growth rate for the first quarter, as stronger net exports add to the calculations for output.

Macroeconomic Advisers, a major forecasting firm, marked up its estimate for first-quarter gross domestic product growth to an annualized rate of 3.1 percent from 2.6 percent. Only a few weeks ago, it was projecting a GDP growth of about 2 percent in the first quarter.

The stronger the GDP growth, the more favorable the conditions for job growth. But Ben Herzon, an economist at Macroeconomic Advisers, cautioned the markup in the first quarter rate could be followed by a markdown in the spring quarter. Hence, there could be little change overall in the expected moderate performance in the first half, for economic activity and hiring.