BLBG: Trade Gap in U.S. Narrowed More Than Forecast in July (Update1)
By Courtney Schlisserman
Sept. 9 (Bloomberg) -- The trade deficit in the U.S. narrowed more than forecast in July as imports fell and exports climbed to the highest level in almost two years.
The gap shrank 14 percent, the most since February 2009, to $42.8 billion, Commerce Department figures showed today in Washington. Economists forecast a deficit of $47 billion, according to the median of 73 projections in a Bloomberg News survey. Imports fell 2.1 percent, while exports increased 1.8 percent to $153.3 billion, the highest since August 2008.
Shipments abroad will probably remain a source of strength for U.S. manufacturers as the world’s largest economy tries to sustain a recovery from the worst recession since the 1930s. Demand for overseas products may cool further as American consumers and businesses curb spending in coming months.
“The U.S. still has a decent export market, and that’s providing a cushion for the U.S. manufacturing industry,” said David Sloan, a senior economist at 4Cast Inc. in New York. The trade figures are “good for the third-quarter GDP outlook.”
Estimates in the Bloomberg survey of 73 economists ranged from $43 billion to $52 billion.
Stock-index futures extended gains after a Labor Department report showed jobless claims fell more than forecast. Futures on the Standard & Poor’s 500 Index rose 0.7 percent to 1,107.2 at 8:36 a.m. in New York.
Fewer Claims
First-time filings for unemployment benefits dropped by 27,000 to 451,000 last week, the Labor Department said. Economists surveyed by Bloomberg forecast a decline to 470,000.
For the latest reporting week, nine states didn’t file claims data to the Labor Department in Washington because of the Labor Day holiday earlier this week, a department official told reporters. California and Virginia estimated their figures and the U.S. government estimated the other seven.
The July balance adjusted for inflation, which is the figure used to calculate GDP, decreased to $47.7 billion from $53.6 billion in June. The gap compares with the average $47.9 billion a month in the second quarter.
Trade subtracted 3.37 percentage points from growth in April through June, the most since record-keeping began in 1947. The Commerce Department on Aug. 27 revised down its estimate for second-quarter growth to a 1.6 percent annual rate from the previously projected 2.4 percent. A final estimate for the quarter will be released Sept. 30.
Slowing Demand
Signs companies are slowing the pace of inventory building and investment in new equipment indicate a cooling of demand for goods made abroad. Orders placed with U.S. factories for business equipment fell 7.2 percent in July, a Sept. 2 Commerce Department report showed. Sales of such goods were down 1 percent.
While smaller gains in business spending may help limit imports to the U.S., the outlook for exports is holding up as emerging economies expand. A report last week showed manufacturing in China grew at a faster pace in August. The gain in the government-backed purchasing managers’ index signaled the economy in China is stabilizing after a slowdown.
U.S. exports of industrial supplies, civilian aircraft, machines and computers all increased in July from a month earlier, while the value of U.S. imports of business equipment and consumer goods fell, today’s report showed.
Shipments abroad may get a lift from a weaker dollar. The yen yesterday touched 83.35 against the dollar, the strongest since May 1995. The dollar has declined almost 4 percent against a trade-weighted basket of currencies since a high this year on May 20.
Geithner on China
Treasury Secretary Timothy F. Geithner, in an interview yesterday with Bloomberg Television, said that China should move faster to loosen restrictions on its currency.
“It’s important for China to let the market play a greater role in setting the exchange rate,” Geithner said. ‘We’d like to see them move more quickly.”
July imports from China were the highest since October 2008, today’s report showed. The U.S. deficit with China narrowed to $25.9 billion in July from $26.2 billion.
Caterpillar Inc., based in Peoria, Illinois, said last month it may add as many as 9,000 workers worldwide this year as sales climb in developing markets. The world’s largest construction equipment maker said about 1,250 of the jobs the company has added so far have been in the U.S.
Shares of Manufacturers
Shares of manufacturers have held up better than the broader market since the U.S. economy showed signs of cooling. The S&P Supercomposite Machinery Index, which includes Caterpillar and Deere & Co., has climbed 15.7 percent this year through yesterday, compared with a 1.5 percent drop in the S&P 500.
Manufacturing unexpectedly expanded at a faster pace in August as production picked up, a report from the Institute for Supply Management showed last week. At the same time, the group’s services index fell in August to the lowest level in seven months.
“What I see is an uneven recovery,” Bob McDonald, chief executive officer of Procter & Gamble Co., the world’s largest household-products maker, said in a Sept. 3 interview with Bloomberg Television. “What I see when I look at our consumer data is the U.S. economy is improving, the global economy is improving, and what we’d like to do is accelerate the rate of growth.”
Public opinion polls show jobs and the economy are top concerns among voters two months before November congressional elections in which the Democrats are at risk of losing their majorities in the House of Representatives and the Senate.
November Elections
President Barack Obama’s approval ratings have slipped and support for the Republican Party has grown amid signs the economy was cooling.
Obama wants Congress to extend middle-income tax cuts, while letting the top tax rates rise. He’s endorsed only an extension of tax cuts for those earning less than $200,000 per individual or $250,000 per couple.
The 3.8 million filers who fall in the $200,000 to $500,000 income range would pay $2 billion more in 2011 taxes, or an average of $532, according to a study by the nonpartisan congressional Joint Committee on Taxation.
To contact the reporters on this story: Courtney Schlisserman in Washington at cschlisserma@bloomberg.net
