THE United States' trade deficit with China narrowed in February to US$1.17 billion from $1.57 billion in January but the reduction seems to have been largely seasonal. Overall, the US trade deficit with the rest of the world widened to $7.19 billion from $7.15 billion as both imports and exports rose slightly. BNP International Financial Services head of research Pauline Dallas said the overall deficit figure was in line with market forecasts following the January figure which had come in below expectations. She said seasonality could have played a part in the drop in the deficit with China. Because of buying patterns, the deficit was relatively low in the first few months of last year, with the peak months in the last two years being August, September and October. Total US exports were $37.2 billion against imports of $44.4 billion. The total export figure is about two per cent higher than February last year, largely due to stronger export growth to the Pacific Rim outside of Japan and also to Latin America, said Mr Joseph Liro, chief economist of S.G. Warburg in New York. ''US unit labour costs are now so much lower than a lot of other industrialised countries that we have been able to increase exports despite weakness in the Japanese and European economies,'' Mr Liro said. He said US analysts were hoping that the recent economic recovery package launched in Japan would stimulate its flagging economy, boosting its ability to buy more US goods. The trade balance between the US and Hongkong staged a big reversal in February, swinging around to a $154 million surplus from a $43 million deficit in January, but as in the China figures, seasonality was involved. The trade relationship between Hongkong and the US showed strikingly similar behaviour last year, moving into surplus in the same month after a string of deficits. While the US deficit with China and Hongkong moved in favour of the US, it was the opposite story with Japan, where the US deficit rose to $4.12 billion from $3.9 billion in January. Total worldwide exports by the US of cars and parts rose $400 million, those of food and beverages $300 million and capital goods exports $100 million. Industrial supplies exports were markedly weaker at $800 million, while consumer goods exports were stagnant. On the imports side, cars and parts were up $700 million, while capital goods rose $100 million. Industrial supplies fell $500 million, food and beverages were down $100 million and other merchandise slid $100 million, with imports of consumer goods virtually unchanged. The US trade surplus with eastern Europe rose to $185.2 billion from $180.1 billion while its surplus with western Europe fell to $1.42 billion from $1.7 billion. Meanwhile, the US Federal Reserve said yesterday industrial production was flat last month, partly blaming the east coast blizzard for a slowdown that snapped a string of five consecutive monthly increases. The Fed revised upwards February's production gain to 0.6 per cent from 0.4 per cent, but revised downwards the January increase to 0.3 per cent from 0.5 per cent. March's flat performance among the country's factories followed five straight monthly increases in production. ''Industrial production was unchanged in March, after having shown strong gains since October,'' the Fed said. ''In part, the slowdown reflects the loss of output following the severe mid-March storm along the east coast; available evidence suggests these losses were only partly made up by month-end.'' The Fed said the industries most affected by the late-winter wallop were textiles, steel, furniture, tobacco and coal mining. ''The exact magnitudes of these effects are tentative,'' the Fed said. It said production last month was 4.1 per cent higher than that of March last year. Car production fell 1.3 per cent and truck production dropped 2.3 per cent. In the major industry groups, production inched up 0.1 per cent in manufacturing and 0.8 per cent in utilities but dropped 1.2 per cent in mining. In major market groups, production fell 0.1 per cent in consumer goods and 0.2 per cent in construction supplies but rose 0.4 per cent in business equipment. The Fed said industries were running at 79.9 per cent of their capacity, down slightly from 80.1 per cent in February.