U.S. trade deficit jumps sharply

The U.S. trade deficit surged to a larger-than-expected $40.18 billion in December, the biggest imbalance in 12 months.
The wider deficit reflected a rebounding economy that is pushing up demand for imports.

The Commerce Department
said the December deficit was 10.4 percent higher than the November imbalance. It was much larger than the $36 billion deficit
that economists had expected.

For December, exports of goods and services rose for an eighth consecutive month,
climbing 3.3 percent, to $142.7 billion, reflecting strong gains in sales of commercial aircraft, industrial machinery and
U.S.-made autos and auto parts.

Imports were up 4.8 percent in December, to $182.88 billion, led by a 14.8-percent
surge in oil imports which rose to the highest level since October 2008.

For all of 2009, the deficit totaled $380.66
billion, the smallest imbalance in eight years, as a deep recession cut into imports. However, economists believe the deficit
will rise in 2010 as U.S. demand for imports outpaces U.S. export sales.

The December deficit was the largest since
the imbalance totaled $41.86 billion in December 2008. The deficit, which hit a nine-year low of $25.81 billion in May, has
been rising in recent months as the U.S. economy has been pulling out of the deepest recession since the 1930s and demand
for imports rebounds.

The deficit is expected to keep rising in 2010 even though U.S. manufacturers will be benefiting
from stronger overseas sales as the global economy rebounds and a weaker dollar makes their products from competitive in foreign
markets. The export gains are expected to be outpaced by an even larger rebound in imports.

Last year’s decline
in the value of the dollar against the euro, the joint currency of 16 European nations, and several other major currencies
has helped make American goods more competitive on overseas markets. That will help lift the fortunes of America’s beleaguered
manufacturing sector.

Caterpillar Inc., the world’s largest maker of construction and mining equipment, said last
month that it expected its sales will rise 10 percent to 25 percent this year. Caterpillar generates more than 60 percent
of its sales overseas and it is forecasting strong growth to come from developing countries including China and India.

Dow Chemical Co., another major U.S. exporter, said that it expected continued improvement in its sales to emerging
markets in Asia and Latin America but is less optimistic about markets in the United States and Europe due to expected continued
high unemployment.