BLBG: U.S. Economy: Trade Gap Grows as Exports Drop to Three-Year Low
June 10 (Bloomberg) -- The U.S. trade deficit widened in April for a second month as some of the world’s largest economies continued to contract, pushing exports to the lowest level in almost three years.
The gap between imports and exports grew 2.2 percent to $29.2 billion, in line with forecasts, from a revised $28.5 billion in March that was larger than previously estimated, Commerce Department figures showed today in Washington. Foreign demand for U.S. goods dropped 2.3 percent, exceeding a decrease in imports.
Imports may be first to rebound later this year as the U.S. economy begins to expand, while exports languish until a recovery takes hold among trading partners from Japan to Germany, widening the deficit further. That danger underscores Treasury Secretary Timothy Geithner’s call for other nations to implement stimulus and financial-rescue plans.
“The U.S. will start to come out of the recession a bit before everyone else as we’ve done more to stimulate the economy,” said Jay Bryson, global economist at Wachovia Corp. in Charlotte, North Carolina. Trade “won’t contribute much to growth.”
The trade gap was projected to widen to $29 billion from an initially reported $27.6 billion in March, according to the median forecast in a Bloomberg News survey of 73 economists. Deficit projections ranged from $31.5 billion to $26 billion.
Commodities Rally
U.S. stocks were little changed as a jump in commodities propelled a rally among raw-material companies, while technology shares dropped. The Standard & Poor’s 500 Stock Index was up 0.2 percent at 942.58 as of 10:33 a.m. in New York. Treasuries fell, sending yields on benchmark 10-year notes to 3.90 percent from 3.86 percent late yesterday.
A growing gap means trade will not help the economy this year as much as in 2008, when it contributed the most to growth in three decades.
The drop in exports reflected reduced foreign demand for engines, machinery and metals. At $121.1 billion, the level of exports was the lowest since July 2006.
“Recovery here depends on recovery abroad,” Geithner, who departs for weekend meetings in Italy with counterparts from some of the world’s biggest economies, told lawmakers yesterday. “We are working closely with other major economies to put in place the fiscal stimulus and make the financial repairs necessary to ensure U.S. and global recovery.”
Exports to Japan dropped to the lowest level since 1994 and those to South and Central America were the weakest in two years, today’s report showed.
Lowest Since 2004
Imports decreased 1.4 percent to $150.3 billion, the fewest since September 2004. The drop was led by declines in purchases of fuel other than crude oil, drilling equipment, computer accessories and toys from abroad.
Imports of crude oil rose as the price climbed to $46.60 a barrel from $41.36 in March, according to today’s report.
Higher fuel costs will probably keep boosting the import bill. A barrel of crude oil on the New York Mercantile Exchange rose above $71 today for the first time in seven months, compared with an average $49.95 in April.
After eliminating the influence of prices, which are the numbers used to calculate gross domestic product, the trade deficit grew to $39.4 billion from $39.1 billion in March. April’s reading was just above the $39 billion average for the first quarter, indicating changes in trade, so far, will have little influence on growth.
The politically sensitive trade gap with China increased to $16.8 billion from $15.6 billion in the prior month.
China’s Currency
Geithner, on a visit to China this month, avoided a showdown over its currency, the yuan. He declined to repeat his comment in January that the nation was “manipulating” the currency and instead welcomed a Chinese commitment to more flexibility over time. The yuan has gained 0.3 percent in the past six months.
A narrowing of the gap prevented the U.S. economy from contracting even more last year. Trade contributed 1.4 percentage points to growth in 2008, the most since 1980.
The boost continued in the first quarter. The economy shrank at a 5.7 percent annual rate in the first the months of 2009, even as trade made a positive contribution of 2.2 percentage points.
An improvement in trade will likely come too late to help global growth. The International Monetary Fund in April said the world economy will shrink 1.3 percent this year and a recovery may take place in the first half of next year. It predicted a 1.9 percent expansion for all of 2010.
Chinese Growth
Some regions are faring better than others. China may expand 7.5 percent this year, according to the median forecast in a Bloomberg survey. Still, the government cautioned this month that a recovery isn’t yet solid.
Japan’s deepest postwar recession is easing, according to the government’s broadest measure of economic health released this week.
For some companies, overseas sales are helping cushion weakness elsewhere. Texas Instruments Inc., the second-largest U.S. semiconductor maker, raised its second-quarter sales and profit forecasts this week as customers slowed the pace of inventory reductions and demand improved in Asia.
“Orders were strong in both April and May thus far, so all that’s looking good,” Vice President Ron Slaymaker said on a conference call this week. “Asia is the biggest driver of growth with the U.S. and Europe continuing to lag.”
