FP:U.S. trade deficit rises as oil prices increase
The trade deficit in the U.S. widened in May to the highest level in almost three years, reflecting a surge in the cost of imported crude oil.
The gap grew 15% to $50.2 billion, exceeding all forecasts of 73 economists surveyed by Bloomberg News and the biggest since October 2008, Commerce Department figures showed Tuesday in Washington. Exports held near April's record.
A weaker U.S. dollar and growing economies overseas may keep bolstering demand for American-made products, benefiting companies like Smithfield Foods. The deficit may narrow as the recent drop in oil costs and a slowdown in consumer spending curb imports, indicating trade will help prop up the world's largest economy.
"Oil has obviously come off, so you're going to have a significant drop back there," said Paul Ashworth, chief U.S. economist at Capital Economics in Toronto. "This quarter, trade will certainly make a strong positive contribution. ... We've had rapid growth in developing countries."
Exceeds forecasts
The trade gap was projected to widen from an initially reported $43.7 billion in April, according to the median forecast of the economists surveyed by Bloomberg News. Estimates ranged from deficits of $40 billion to $48 billion. The Commerce Department revised the April shortfall to $43.6 billion.
After eliminating the influence of prices, which renders the figures used to calculate gross domestic product, the trade deficit rose to $47.8 billion from $43.9 billion. The second-quarter average so far remains lower than the $50.4-billion average in the first three months of the year, indicating trade will probably contribute to growth for the April-through-June period.
Economists at Goldman Sachs Group are among those projecting that trade will add to growth this quarter.
Near-record imports
Imports rose 2.6% to $225.1 billion, second only to the record $231.6 billion reached in July 2008. Purchases of food and capital goods produced overseas reached records in May, the report showed. The latter is a sign business investment in the U.S. continues to advance.
Excluding petroleum, the trade gap rose to $19.8 billion from $17.5 billion in April.
