Trade deficit swells 10.4 percent in March

Shipping containers sit at the New York Container Terminal in New York April 11, 2007. The U.S. trade deficit widened more than expected in March to $63.9 billion, as higher oil prices helped push total imports to the second highest on record, a U.S. government report showed on Thursday.

WASHINGTON (Reuters) - Higher oil prices and imports in March pushed the U.S. trade deficit to its widest level in six months, according to a government report on Thursday that suggested weaker U.S. economic growth.

In another worrisome sign for the economy, major department store chains said they had poorer-than-expected sales in April, with many blaming the early Easter holiday and cool weather for the results.

The data weighed on U.S. stock prices and helped pushed bonds prices higher. The dollar rose against both the yen and the euro as investors repositioned their holdings after three key central bank meetings this week.

The trade gap grew more than 10 percent in March to $63.9 billion, as U.S. oil imports reached their highest level since August 2006 and the average price for imported oil rose to $53.00 per barrel from $50.71 in February, the Commerce Department said in a report.

Oil import prices continued to rise in April, a second report showed, suggesting further outward pressure on the trade deficit in the months ahead. Other import prices were surprisingly robust, analysts said.

The large March trade gap prompted some analysts to trim estimates of first-quarter U.S. economic growth to 0.7 percent or even less, from the 1.3 percent the government initially estimated last month.

"It indicates a downward revision in growth based on early estimates for the first quarter," said Keith Hembre, chief economist at FAF Advisors in Minneapolis.

JOBS DATA OVERSHADOWED

In a bit of good news overshadowed by other data, the Labor Department reported the number of U.S. workers filing new claims for jobless benefits in the week ended May 5 fell unexpectedly by 9,000 to the lowest level since mid-January.

The Commerce Department will release its closely watched retail sales survey on Friday.

The private SpendingPulse survey released on Thursday showed retail sales increased 0.5 percent in April, but much of the gain was driven by a surge in gasoline prices.

After stripping out car and gasoline sales, retail sales grew just 0.1 percent in April, half the O.2 percent rise in March, SpendingPulse said.

Overall U.S. imports increased 4.5 percent in March to $190.1 billion, led by a gain of more than 11 percent in imports of industrial supplies and materials, which includes crude oil.

Record imports of consumer goods and food, feed and beverages also helped push the overall tally higher.

However, U.S. exports had another strong showing, rising 1.8 percent in March to $126.2 billion, second only to the record set in January.

U.S. exports to Canada, the European Union -- and individually to Germany -- and China set records, while shipments to Japan were the highest since March 2001.

"For us to increase our exports, we need other developed economies to do better and to grow and we're beginning to see that," Commerce Secretary Carlos Gutierrez said.

"One of the things we're seeing that is very positive news, a nice turnaround, is exports to the European Union up 22 percent" in the first quarter of 2007, he added.

The United States also exported record amounts of advanced technology products such as computer, telecommunications, aerospace and electronic equipment.

The closely watched U.S. trade deficit with China shrank 6.4 percent to $17.2 billion, as imports from that country were the lowest since May 2006.

Despite widening dramatically in March, the trade gap for the first quarter of the year totaled $180.7 billion, smaller than the $191.6 billion in the same period last year when the annual deficit hit a record $765.3 billion.

"That's a good sign," which reflects a 9.8 percent growth in exports during the first quarter compared to a 4.2 percent growth in imports, Gutierrez said.