BLBG: Trade Deficit in U.S. Narrows in May as Exports Increase
July 10 (Bloomberg) -- The U.S. trade deficit unexpectedly fell in May to the lowest level in almost a decade as exports jumped while imports of crude oil and auto parts declined.
The gap between imports and exports decreased 9.8 percent to $26 billion, the smallest deficit since November 1999, from a revised $28.8 billion in April that was lower than previously estimated, the Commerce Department said today in Washington. Imports fell while exports rose the most since July 2008.
A shrinking deficit signals trade will contribute more to U.S. growth as exports to emerging economies such as Brazil increase. Meanwhile, U.S. demand for imported auto parts was held down in May by production cutbacks and factory shutdowns by General Motors Corp. and Chrysler LLC.
``Orders for durables in the past few months have picked up and some of that demand is coming from overseas,'' Zach Pandl, an economist at Nomura International Securities Inc. in New York, said before the report.
The trade gap was projected to widen to $30 billion, from an initially reported $29.2 billion in April, according to the median forecast in a Bloomberg News survey of 71 economists. Deficit projections ranged from $34 billion to $25.5 billion.
Exports rose 1.6 percent, the biggest increase since July 2008, to $123.3 billion, as sales of petroleum products, chemicals and industrial machinery increased. Exports this year have gotten a boost from aircraft manufacturers. Boeing Co., the world's second biggest commercial-plane maker, said it got 20 orders in May, up from 17 in April.
Oil Imports Decline
Imports fell 0.6 percent to $149.3 billion after decreasing the prior month. The import figures were held down by a decline in purchases of foreign crude oil to $12.9 billion from $13.8 billion, reflecting lower demand for petroleum even as prices rose. The cost of imported oil averaged $51.21 a barrel, up from $46.60 in April, according to today's report. Oil prices have been falling since June 11.
Imports of industrial supplies, which include crude oil, fell by $656 million to $33.1 billion. Demand for consumer goods from abroad was little changed at $35.5 billion.
After eliminating the influence of prices the trade deficit narrowed to $36.2 billion from $40.1 billion. Those numbers are used to calculate gross domestic product.
The trade gap with China increased to $17.5 billion from $16.8 billion in the prior month. Deficits with Canada, Mexico and Japan shrank. The deficit with the European Union fell 48 percent to $2.8 billion as demand for European goods declined.
Contribution to Growth
While symptomatic of global weakness, the narrowing of the trade 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 to U.S. growth from net exports continues this year. The economy shrank at a 5.5 percent annual rate in the first quarter, even as net exports made a positive contribution of 2.4 percentage points.
World trade this year may shrink 12 percent before growing 1 percent next year, the International Monetary Fund said this week in its latest global growth outlook. The world economy will shrink 1.4 percent this year and then recover next year with a 2.5 percent expansion, according to the forecast.
The U.S. is faring relatively better than some key trading partners. The U.S. economy may shrink 2.6 percent this year, according to the IMF, compared with an estimated 6 percent contraction in Japan, a 4.8 percent decline in the Euro zone and an estimated 7.3 percent drop in Mexico.
IMF Forecasts
Canada, the biggest U.S. trading partner, may shrink 2.3 percent. China, the next-largest, will grow 7.5 percent this year and, together with Brazil and other emerging economies, help bring an end to the global slump, the IMF said.
China will ``actually be one of the motors of the world economy, replacing the U.S. consumer,'' billionaire investor George Soros said this week in an interview with Bloomberg Radio.
Santa Clara, California-based National Semiconductor Corp., whose memory chips supply the top five mobile-phone manufacturers, said June 11 that stimulus spending in China has helped boost its sales.
``We're benefiting from the buildup in China but we're not counting on it to go on forever,'' Chief Executive Officer Brian Halla said in a telephone interview. ``Things have stabilized. I don't think anyone in this industry is positive enough to say that we've recovered.''
