U.S. trade deficit widens in February

The U.S. trade deficit unexpectedly widened in February as exports hit a five-month low, suggesting first-quarter growth could be much weaker than initially anticipated.

Despite the trade setback, the economy remains on track to regain momentum as the year progresses. Other data Thursday showed activity in the services sector accelerating in March after being hampered by unusually cold weather.

The Commerce Department said the monthly deficit on the trade balance increased 7.7 percent to $42.3 billion, the largest since September last year.

Economists, who had expected the deficit to narrow to $38.5 billion, said trade could slice off as much as half a percentage point from first-quarter gross domestic product.

The economy grew at a 2.6 percent pace in the final three months of 2013.

In February, exports fell 1.1 percent to $190.4 billion, the lowest level since September. Exports dropped in nearly all categories, with the largest decline in industrial supplies and materials.

While exports to China tumbled 4.6 percent, a 19.5 percent plunge in imports narrowed the politically sensitive U.S. trade deficit with the world's second-largest economy to its smallest level since March 2013.

Some of the drop in imports was likely due to the Chinese New Year holiday. Though overall imports rose 0.4 percent, petroleum imports were the lowest in a year.

Declining petroleum imports, as a domestic energy production boom reduces the nation's dependency on foreign oil, helped to shrink the trade deficit last year.