Ahead of the Bell: Trade Deficit Expected to Widen

The U.S. trade deficit likely widened slightly in January reflecting a higher foreign oil bill and a drop in aircraft exports.

Economists surveyed by Thomson Reuters expect the trade deficit increased to $41 billion, a 2 percent increase from December. The Commerce Department is scheduled to release the report at 8:30 a.m. EST Wednesday.

Economists believe that imports will be up because of higher global crude oil prices and an increase in the volume of oil shipped into the country. They are looking for U.S. exports to be held back by a fall in shipments of commercial aircraft, a category that had shown a big gain in December.

Economists are expecting similar patterns to what was seen in December when the trade deficit jumped to $40.18 billion, the largest imbalance in 12 months. That deficit reflected a rebounding U.S. economy pushing up demand for oil and other imports.

For all of 2009, the deficit totaled $380.66 billion the smallest imbalance in eight years, reflecting a deep recession which cut into imports for the first half of the year.

The deficit with China, after setting a string of record imbalances, actually fell in 2009 but economists believe it will resume widening in 2010 as the U.S. economy recovers, triggering rising orders for Chinese shoes, toys and other low-cost items in high demand by American consumers.

The Chinese government reported Wednesday that China's exports rose in February by 45.7 percent from a year earlier. Some analysts said the big rise in Chinese exports might increase chances that the Chinese government will resume allowing China's currency, the yuan, to rise in value against the dollar.

China has held the yuan steady against the dollar for 18 months to help Chinese exporters withstand the global economic crisis. But the United States and other countries have been increasing pressure on China to allow its currency to resume rising in value now that the global economy is rebounding.