Ahead Of The Bell: Trade Deficit

WASHINGTON (AP) — The U.S. trade deficit likely widened a bit in December, possibly reflecting weaker exports to Europe.

Economists forecast the deficit rose slightly to $48 billion in December, according to a survey by Fact Set. The Commerce Department will release the report at 8:30 a.m. Friday.

In November, the deficit rose to $47.8 billion. Higher oil prices were the main reason for the increase. That drove the value of imports up 1.3 percent, to a monthly record of $225.6 billion.

Exports dropped 0.9 percent to $177.8 billion in November. And American exports to Europe fell much more sharply — nearly 6 percent.

Europe, which consumes nearly one-fifth of America's exports, may already be in a recession. A weakening Europe could further shrink demand for American goods and slow the U.S. economy just as the job market has started to strengthen.

Economic growth weakens when exports decline because factories tend to produce fewer goods. And U.S. companies earn less.

For all of 2011, exports are expected to hit an all-time high of about $2.10 trillion. Imports are also likely to set a record, at roughly $2.66 trillion.

When imports and exports are viewed together, trade was a small positive for growth in 2011. The export growth slightly outpaced the increase in imports.

The economy grew a sluggish 1.7 percent in 2011, roughly half the rate in 2010.

For 2012, economists at JPMorgan Chase forecast economic growth of around 2.3 percent. Trade is expected to be neutral as solid growth in exports is expected to be roughly offset by growth in imports.

However, that forecast could prove too optimistic if the slowdown in Europe worsens, given that this region is a top market for U.S. exports.

The rising trade deficit at a time of high unemployment in the United States has heighted trade tensions, particularly with China. The Obama administration has been urging China to allow its currency to rise more quickly in value against the dollar. That would boost U.S. exports to China by making them cheaper, while making Chinese goods more expensive for American consumers.