U.S. Trade Gap Unexpectedly Shrinks to 10-Month Low; Jobless Claims Climb

The U.S. trade deficit unexpectedly shrank in November as growing global demand and a weaker dollar help boost overseas sales of everything from aircraft to cotton.

The gap shrank 0.3 percent to $38.3 billion, the smallest in 10 months, as exports climbed to the highest level in more than two years, according to data today from the Commerce Department in Washington. Other reports showed increases in claims for jobless benefits and wholesale prices.

A 10 percent drop in the dollar since March 2009 is making American goods more competitive abroad, lifting demand at companies like General Electric Co. and Boeing Co. that is propelling the factory-led economic recovery. The gain in exports exceeded an increase in imports that mainly reflected a price-driven surge in purchases of crude oil as the global rebound pushes up commodity costs.

“Exports will be a pretty significant boost” to growth in the fourth quarter, said Jay Bryson, a global economist at Wells Fargo Securities LLC, who had forecast the deficit would shrink. “Exports remain relatively strong because of some bounce-backs in the rest of the world.”

Applications for jobless insurance payments rose by 35,000 to 445,000 in the week ended Jan. 8, according to Labor Department data, as more Americans than usual were let go following the holidays. The figures are volatile during this time of year because it’s difficult for the government to adjust the numbers for seasonal changes.

For that reason, economists prefer to focus on the average number of applications over the past four weeks, which increased to 416,500 after reaching a two-year low.

‘Slow Decline’

“The underlying trend is still a slow decline in claims,” said Lindsey Piegza, an economist at FTN Financial in New York. “We’re taking steps in the right direction though it’s not enough to move the unemployment rate down precipitously.”

The producer price index increased 1.1 percent in December from the prior month, the most in almost a year, led by higher prices for commodities such as fuel and food, another Labor Department report showed.

Stocks dropped on concern over the jump in claims and as commodity prices decreased. The Standard & Poor’s 500 Index fell 0.2 percent to 1,283.76 at 4 p.m. close in New York. Treasury securities climbed, sending the yield on the benchmark 10-year note down to 3.30 percent from 3.37 late yesterday.

The trade gap was projected to widen from an initially reported $38.7 billion in October, according to the median forecast of 71 economists surveyed. Estimates ranged from deficits of $37.5 billion to $43.5 billion. The Commerce Department revised the October shortfall to $38.4 billion.

Helping Economy

After eliminating the influence of prices, which are the numbers used to calculate gross domestic product, the deficit increased to $45.2 billion from $44.8 billion. The fourth- quarter average so far is smaller than for the previous three months, indicating trade will contribute to growth.

Exports increased 0.8 percent to $159.6 billion, the most since August 2008. Demand for American goods from China reached a record, and purchases from Germany were the strongest in two years.

The dollar has declined against a trade-weighted basket of currencies since reaching a four-year high on March 3, 2009, in the aftermath of the financial crisis that brought down Lehman Brothers Holdings Inc. The decrease makes American goods cheaper to buyers abroad and will keep spurring manufacturing, which expanded for a 17th consecutive month in November.

Emerging Markets

GE last month said sales may increase as much as 5 percent this year as its industrial divisions, which include the world’s largest manufacturers of power-generation equipment, jet engines and locomotives, return to growth.

In an annual outlook meeting with investors on Dec. 14, GE’s Chief Executive Officer Jeffrey Immelt said the pace of industrial expansion will increase further in 2012. He pointed to Brazil as an emerging market where GE is building investments to fuel sales growth.

Boeing, which sold more than three times as many commercial airplanes in 2010 as the year before, is boosting production this year to accommodate orders from airlines and lessors. Randy Tinseth, marketing chief at Boeing’s Commercial Airplanes unit, said in a Jan. 6 interview that the growth trend for orders will continue as passenger and cargo traffic rebounds and emerging economies expand.

President Barack Obama is seeking to double American exports over five years to spur growth and employment.

Obama’s Challenge

Obama “can claim we’re on base” as exports climbed 17 percent from January through November compared with the same period in 2009, said Wells Fargo’s Bryson. “It’s going to be challenging” to maintain that pace for four more years, he said.

Imports increased 0.6 percent to $198 billion. The value of crude oil purchases increased to $19.8 billion from $18.9 billion in October. The price per barrel of imported crude reached the highest level since May.

The trade gap with China was little changed at $25.6 billion, as U.S. demand for their goods also climbed. Growing American purchases of computers made in China helped widen the U.S. deficit in advanced technological products to the highest level on record.

Obama is due to meet with Chinese President Hu Jintao in Washington on Jan. 19 as currency policy remains a point of contention between the two governments.

U.S. Treasury Secretary Timothy F. Geithner yesterday said China needs to strengthen the “substantially undervalued” yuan because it puts other countries at a competitive disadvantage.

To contact the reporter on this story: Bob Willis in Washington at bwillis@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net

Bloomberg reserves the right to edit or remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.