US trade fears hit growth forecasts

The US trade deficit shrank in February as a slowdown in demand both domestically and abroad hit imports and exports, prompting analysts to scale back their forecasts for economic growth in early 2011.

The trade gap totalled $45.8 billion (28bn), down 2.6 per cent from January despite another monthly rise in oil prices to their highest since October 2008, according to US government figures.

The impact of the oil price jump was tempered by a drop in the volume of oil imports to the lowest in 12 years.

A separate report showed petrol prices surged 10.5 per cent in March, suggesting bigger trade shortfalls ahead.

Paul Dales, senior US economist with Capital Economics in Toronto, said: "The narrowing in the trade deficit in February is a brief respite before the impact of the more recent surge in oil prices pushes the deficit sharply wider.

"In any case, it looks like net trade was a drag on real GDP growth in the first quarter, adding to other evidence the economy has slowed."

Michelle Meyer, senior economist at Bank of America Merrill Lynch in New York, said the trade report showed "there are headwinds for the global economy… there are lot of geopolitical uncertainties weighing on trade".