Trade Gap in U.S. Unexpectedly Widened in May to $42.3 Billion
Shipping containers are stacked at the Port of Wilmington, North Carolina. Photographer: Jim R. Bounds/Bloomberg
The trade deficit in the U.S. unexpectedly widened in May to the highest level since November 2008 as a gain in imports outpaced growth in exports.
The gap expanded 4.8 percent to $42.3 billion as U.S. companies imported more automobiles and consumer goods, Commerce Department figures showed today in Washington. The deficit was projected to narrow to $39 billion, according to the median forecast in a Bloomberg News survey. Imports and exports rose to the highest level since 2008.
The increase in trade flows showed a global economy that was strengthening before recent figures signaled a pause last month in growth in China, Europe and the U.S. The fallout from the European debt crisis may limit overseas demand, while an increase in the value of the dollar makes American goods less competitive abroad.
“Exports grew in response to the strengthening of growth in several of our major trading partners, especially in Asia,” Steven Wood, president of Insight Economics LLC in Danville, California, said before the report. “The turmoil in Europe has been too recent to show up in the trade data yet.”
Estimates of 72 economists surveyed by Bloomberg ranged from deficits of $37 billion to $41.5 billion. The gap in April was $40.3 billion. The figures indicate trade subtracted from gross domestic product in the second quarter.
The deficit with China increased in May to the highest level since October, while imports from India were the most ever.
Exports from the U.S. to the rest of the world increased 2.4 percent to $152.3 billion, reflecting gains in industrial materials, business equipment and semiconductors. Imports rose 2.9 percent in May to $194.5 billion, led by an increase in demand for cars, pharmaceuticals, toys and clothing from abroad.
Alcoa Sales
Alcoa Inc., the largest U.S. aluminum producer, reported yesterday second-quarter sales and profit that beat analysts’ estimates. The company said it expects aluminum sales for automotive use to increase by 3 percent to 8 percent this year, while sales for commercial trucks and trailers may gain 12 percent to 17 percent, Chief Executive Officer Klaus Kleinfeld said on a conference call yesterday.
“We are really working very hard to fire on all cylinders,” Kleinfeld said. “Undoubtedly we are not seeing the environment we’ve seen in the past but we see the environment getting better and continuously moving in the right direction.”
Today’s report showed the trade gap with China rose to $22.3 billion from $19.3 billion in the prior month. While the U.S. exported 2.5 percent more to China in May, imports from the Asian nation surged 12 percent.
June Figures
China, the world’s biggest exporter, on July 10 reported that its overseas sales jumped 44 percent in June from a year earlier and the trade surplus more than doubled to $20 billion, the highest in eight months.
The surge in Chinese exports in June and the doubling of the trade surplus may prompt U.S. lawmakers to intensify pressure on China to step up the pace of yuan appreciation even as the outlook for overseas demand cools.
China on June 19 indicated it was ending the yuan’s peg to the U.S. dollar and has since allowed it to appreciate 0.8 percent. Still, the U.S. Treasury Department said July 8 the Chinese currency “remains undervalued.”
Gains in U.S. consumer spending and business investment suggest demand for goods made abroad will persist. Household purchases increased 0.2 percent in May after no change the previous month, while inventories at wholesalers rose in May for a fifth month, according to figures from the Commerce Department.
U.S. Dollar
The outlook for exports has dimmed after the dollar climbed 3 percent since mid-April against a trade-weighted basket of currencies of major trading partners amid concerns that efforts to reduce government debt in Europe will hamper the economic recovery.
The U.S. deficit with the European Union widened 7.5 percent in May as imports outpaced a gain in exports, today’s report showed.
In addition to making American goods more expensive to European buyers, the dollar’s appreciation will also weigh on sales in places where U.S. companies compete with European firms.
The quantity of imported petroleum declined, with the price per barrel falling to $76.93 a barrel, according to today’s report. A barrel of crude on the New York Mercantile Exchange averaged $74.12 for the month, down from $84.58 in April.
The balance adjusted for inflation, which is the figure used to calculate gross domestic product, increased to $46 billion in May. The gap was larger than the average $42.3 billion a month in the first quarter, putting trade on track to subtract from growth from April through June.
Obama on Exports
U.S. President Barack Obama has made export growth a key economic policy initiative. Last week, Obama reiterated the administration’s goal of doubling U.S. exports during the next five years to about $3.1 trillion by 2015, supporting 2 million additional jobs.
“Export growth leads to job growth and economic growth,” Obama said on July 7. Exports in 2008 accounted for about one in three manufacturing jobs and pay 15 percent more on average, he said. “So at a time when jobs are in short supply, building exports is an imperative.”
To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net
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