The U.S. trade deficit widened in March for the first time in eight months as the global economic slump pushed exports to the lowest level in more than two years. The gap expanded 5.5 percent to $27.6 billion, smaller than forecast, from a nine-year low of $26.1 billion in February, the Commerce Department said today in Washington. Imports also decreased as a drop in demand for industrial supplies such as natural gas and steel offset an increase in oil. The report signals most of the improvement in the trade deficit may already be over as fuel costs climb and government stimulus programs here and abroad spur global demand later this year. Rising imports and a bigger trade gap would hurt economic growth, blunting some of the benefit from a rebound in exports that companies such as Caterpillar Inc. are beginning to detect. ``The sharp narrowing trend seen in the last several months appears to be leveling off,'' Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York, said before the report. ``As American consumers come back, that will widen the trade deficit and erase the positive effect'' on the economy. The trade gap was projected to widen to $29 billion, according to the median forecast in a Bloomberg News survey of 65 economists. Deficit projections ranged from $23 billion to $32.5 billion. Exports declined 2.4 percent to $123.6 billion, the fewest since August 2006. The drop was led by decreasing foreign purchases of automobiles and capital goods, such as commercial aircraft and telecommunications equipment. Canceled Orders Boeing Co. last week sustained 25 cancellations of its delayed 787 Dreamliner worth $4.4 billion. Cancellations in the first four months of the year now total 59, versus 58 purchases, according to data published May 7 on the Chicago-based company's Web site. Intel Corp., the world's biggest chipmaker, on April 14 said first-quarter profit fell 55 percent because of slowing computer demand and signaled sales won't recover in the current period. ``Europe, Japan and the emerging markets showed continuing weakness,'' Chief Executive Officer Paul Otellini said in a statement Still, there are signs the worst may be over. Caterpillar, the world's largest maker of bulldozers and excavators, is among companies already noticing an improvement in sales to China due to that country's $586 billion stimulus package, said Chief Executive Officer James Owens. Demand in China ``March and April were pretty strong months for sales in China,'' Owens said on an April 21 conference call with analysts. China's stimulus spending for public works projects is working more quickly than that in the U.S. ``When they say `shovel ready,' they mean nine weeks, not nine months,'' he said. The trade gap with China increased to $15.6 billion from $14.2 billion in the prior month. A gain in imports from China overshadowed an increase in Chinese demand for American-made goods that pushed U.S. exports to the highest level since October. China today reported that business investment surged 31 percent in the first four months of the year compared to 2008. The gain helped offset a 23 percent drop in April exports from the same month last year. A report from the Institute for Supply Management this month showed factory exports fell in April at a slower pace. The group's index of sales overseas climbed to the highest level since September, a month before the slump began. Boost to GDP After eliminating the influence of prices, which are the numbers used to calculate gross domestic product, the trade deficit grew to $35.9 billion from $35.7 billion. The Commerce Department estimated a much larger increase when calculating first-quarter gross domestic product, indication the slump in growth may be revised down. A preliminary report issued last month showed the economy shrank at a 6.1 percent annual pace. Imports decreased 1 percent to $151.2 billion, the fewest since September 2004. The slump in U.S. business investment weakened demand for capital goods such as engines and machinery, in addition to the drop in industrial supplies. The overall drop in demand for foreign goods overshadowed the first increase in automobile imports since June and the first gain in demand for foreign-made consumer goods since October that reflect a stabilizing in retail sales. The imported-petroleum bill also grew as prices climbed. The average cost of a barrel of crude oil rose to $41.36 in March from $39.22 a month earlier. The price probably kept climbing last month, according to trading on the New York Mercantile Exchange, indicating imports will continue to rise. An improvement in trade may come too late to prop up global growth. The world economy may shrink 1.3 percent this year, the first contraction in the postwar era, and trade worldwide may plunge 11 percent, according forecast by the International Monetary Fund.

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