WASHINGTON-According to the Commerce Department, the overall U.S. trade deficit improved more than expected in February, in large part thanks to strong performance in the manufacturing sector.

Frank Vargo, National Association of Manufacturers (NAM, Washington) vice president for international economic affairs, says the deficit in manufactured goods trade "improved slightly in February 2006 to a seasonally-adjusted annual rate of $509 billion, down from January's rate of $546 billion. This improvement was the big reason the overall deficit contracted to a rate of $826 billion in February compared to $868 billion in January.

"The most notable shift was in capital goods trade, where a gradually improving trade balance trend has been evident for a number of months. February's figures actually show a modest capital goods surplus of $3 billion" at an annual rate," Vargo says.

"You can't read too much into month to month changes," cautions Vargo. "But, there is some cause for optimism in that manufactured goods exports so far this year are up 13 percent over the comparable period of 2005, while manufactured goods imports are up 9 percent.