U.S. exports to Europe fell, raising concerns that the debt crisis in that region could dampen U.S. economic growth.
The Commerce Department says the January trade deficit widened to $52.6 billion, the biggest gap since October 2008. Imports rose 2.1 per cent to a record $233.4 billion. Exports were up a smaller 1.4 per cent to $180.8 billion. Exports to Europe fell 7.5 per cent.
Economists are looking for the deficit this year to widen from last year's $560 billion imbalance, reflecting in part the economic woes in Europe, which represents about 20 per cent of America's export market.
Economic growth weakens when exports decline because factories tend to produce fewer goods. And U.S. companies earn less.
A National Association for Business Economics forecasting panel has projected that the deficit for 2012 will narrow by 4.1 per cent to $535.4 billion and will edged down further to $525 billion in 2013 as growth in exports keeps pace with import increases.
The economy grew at an annual rate of 3 per cent in the final three months of 2011. For all of 2011, the economy expanded by just 1.7 per cent, roughly half the rate in 2010. The NABE forecasting panel expects growth to improve to 2.3 per cent this year and accelerate to 2.8 per cent in 2013.
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.