U.S. Economy: Trade Deficit Widens Most Since 1999
The U.S. trade deficit widened in July and imports gained by a record 4.7 percent, signaling a revival of commerce as the global recession eased.
The gap between imports and exports grew 16 percent, the most in more than a decade, to $32 billion from a revised $27.5 billion in June that was larger than previously estimated, the Commerce Department said today in Washington. In another sign the U.S. slump may be ending, a Labor Department report showed jobless claims last week fell to the lowest level since July.
Imports outpaced a 2.2 percent gain in exports as businesses replenished stockpiles of goods including pharmaceuticals, toys and televisions in anticipation of rising consumer demand, while automakers boosted purchases of parts and machinery. The export gain reflected renewed demand for U.S.- made goods among trade partners such as Mexico and Japan.
“We’ve also seen a pretty solid pickup in export growth and that should continue as we see evidence the global economy is picking up steam,” said Brian Bethune, chief financial economist at IHS Global Insight Inc. in Lexington, Massachusetts. Referring to the government’s auto trade-in program, he said “even before cash-for-clunkers got into its sweet spot, automakers were already in the process of ramping up production.”
The trade gap was projected to widen to $27.3 billion, from an initially reported $27 billion in June, according to the median forecast in a Bloomberg News survey of 74 economists. Deficit projections ranged from $25 billion to $30.3 billion.
Oil Prices
Imports rose to $159.6 billion after also increasing the prior month. The import figures reflected a rise in crude oil prices and demand for cars, automotive parts, goods such as computers and televisions and industrial supplies.
The number of Americans filing first-time claims for jobless benefits dropped by 26,000 to 550,000 in the week ended Sept. 5, lower than economists forecast, from a revised 576,000 the week before, Labor Department data showed.
Stocks rose after the reports. The Standard & Poor’s 500 Index closed up 1 percent at 1,044.14 in New York, while the Dow Jones Industrial Average ended the day up 0.8 percent at 9,627.48.
Imports of petroleum products increased to $22.4 billion, the highest since December, as crude oil prices rose to an average $62.48 a barrel in July from $59.17 in June, according to Commerce Department data.
Industrial Supplies
Imports of industrial supplies, which include crude oil, rose to $38.4 billion from $37 billion. Demand for consumer goods from abroad rose to $35.4 billion from $33.7 billion the prior month. Demand for capital goods rose to $30.2 billion from $28.9 billion, led by an increase in demand for cars and auto parts to $13.5 billion from $11.1 billion.
Purchases of auto parts and industrial supplies by companies such as General Motors Co. and Hyundai Motor Corp. got a boost from the “cash-for-clunkers” program and the annual retooling of plants.
The gain in auto imports was probably even bigger in August when the trade-in program spurred car sales to 14.1 million units on an annual basis, the most since May 2008.
Exports gained to $127.6 billion, led by sales of capital goods including cars, civilian aircraft and computers, as well as stronger demand for industrial supplies and consumer goods.
After eliminating the influence of prices, which are the numbers used to calculate gross domestic product, the trade deficit widened to $38.8 billion from $35.8 billion.
Growth Forecast
Economists surveyed by Bloomberg last month forecast the economy will grow at an average 2.1 percent pace in the second half of 2009.
Exports are likely to keep expanding as the global recession eases. The economy in China, the U.S.’s second- largest trading partner, may grow 9.5 percent next year after an 8.3 percent increase this year, according to a Bloomberg survey of 22 economists conducted the week ending Aug. 28.
The trade gap with China increased to $20.4 billion from $18.4 billion in the prior month.
At the same time, Alcoa Inc., the largest U.S. aluminum producer, is among companies profiting from rising demand in China for commodities. Alcoa last week raised its 2009 forecast for global aluminum consumption because of demand triggered by China’s 4 trillion yuan ($586 billion) in stimulus spending.
China Stimulus
Chief Executive Officer Klaus Kleinfeld said in an interview that he expects China’s consumption of the metal to rise 4 percent this year, compared with an earlier prediction of zero growth.
“China is back,” Kleinfeld said in an interview. “They had a lot of shovel-ready projects” planned for 2011 that are being started now as part of the country’s stimulus efforts, he said.
The U.S. trade gap with the European Union almost doubled to $8 billion from $4.5 billion, while the gap with Canada rose to $2.2 billion from $1.5 billion and the deficit with Mexico narrowed.
Former Federal Reserve Chairman Alan Greenspan yesterday said the U.S. economy will start to recover by yearend, helped by “remarkable growth” in productivity. In a speech in New York, he predicted “a fairly pronounced recovery, not only in the U.S.,” but globally.