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Trade Deficit in the U.S. Shrank More Than Forecast in June

Photographer: Paul Taggart/Bloomberg

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Photographer: Paul Taggart/Bloomberg

Shipping containers sit stacked at the Port of New Orleans.

The U.S. trade deficit narrowed more than forecast in June as the biggest drop in crude oil prices in more than three years helped cut the nation’s import bill.

The gap shrank 11 percent to $42.9 billion, the smallest since December 2010, from $48 billion in May, Commerce Department figures showed today in Washington. The median forecast in a Bloomberg News survey of 69 economists called for the deficit to shrink to $47.5 billion. Exports climbed to a record on demand for autos and industrial engines.

The better-than-projected reading may help boost second- quarter growth figures when the government revises the data later this month. The recent rebound in oil prices and slowing economies in Europe and Asia mean the deficit will probably not keep contracting, making it more difficult for trade to aid the economic expansion.

"For all the talk about the troubles in Europe and China slowing, what’s going on around the world is not make or break for the U.S. recovery,” said Stephen Stanley, chief economist at Pierpont Securities LLC in Stamford, Connecticut. “This report is a positive in the sense that growth in the first half of the year was a little better than reported.”

Bloomberg survey estimates ranged from a deficit of $44 billion to $50 billion. The Commerce Department revised the trade deficit for May from an initially reported $48.7 billion.

Claims Drop

Fewer Americans filed applications for unemployment benefits last week, a sign the labor market may keep improving after employment picked up in July, another report today showed. Jobless claims unexpectedly dropped by 6,000 to 361,000 in the week ended Aug. 4, according to the Labor Department. The median forecast of 43 economists surveyed by Bloomberg News called for an increase to 370,000.

Stock-index futures trimmed earlier losses after the reports. The contract on the Standard & Poor’s 500 Index maturing in September fell 0.2 percent to 1,396.1 at 9:14 a.m. in New York.

Imports dropped 1.5 percent to $227.9 billion from $231.4 billion in the prior month. In addition to crude oil purchases of computers and televisions also fell.

The value of imported crude oil fell to $26.4 billion, the least since February. The cost of a barrel of crude decreased $7.78 to $100.13, the biggest decline since January 2009.

Oil Rebound

Oil prices have since started to rebound, which may hurt U.S. consumers’ buying power. Brent crude on the ICE Futures Europe exchange in London rose as high as $109.13 a barrel on Aug. 3, up from a low this year of $88.49 on June 21.

Exports increased 0.9 percent in June to $185 billion.

After eliminating the influence of prices to produce the numbers used in calculating gross domestic product, the trade deficit declined to $44.2 billion, the smallest since March 2010, from $47.7 billion.

Figures on gross domestic product released before today’s report initially showed the trade gap subtracted 0.3 point from growth in the second quarter after having little effect the prior three months. The U.S. economy expanded at a 1.5 percent annual rate from April to June.

Today’s figures will add about 0.5 percentage point to GDP, according to Pierpont Securities’ Stanley.

Exports may struggle to keep supporting U.S. growth as countries in Europe teeter near recession and China’s expansion cools.

European Economies

The U.K.’s economy contracted 0.7 percent last quarter, the most since 2009, government data show. Italy’s economy shrank for a fourth straight quarter in the three months through June as manufacturing slumped and the euro-area debt crisis intensified, according to a report this week.

In Asia, China’s growth slowed to the weakest pace since 2008, expanding 7.6 percent last quarter from a year earlier, the country’s National Bureau of Statistics said July 13.

“There continues to be significant uncertainty regarding the global economy,” Jim Rogers, chairman and chief executive officer of Eastman Chemical Co. (EMN), said during a July 31 earnings call. “Our view is that Europe is near or at a recessionary level, but we are not anticipating things to get worse. In Asia- Pacific and particularly in China, growth has slowed but we don’t see signs of further weakening there either.”

Measures of manufacturing activity reflect the global deterioration’s effect on production. The Institute for Supply Management’s index of factory export orders has fallen for three consecutive months. It fell in July to the lowest level since April 2009, indicating that bookings are contracting.

Bernanke’s View

Federal Reserve Chairman Ben S. Bernanke told Congress last month the European debt crisis was a main source of risk. Central bank officials “will closely monitor incoming information on economic and financial developments and will provide additional accommodation as needed to promote a stronger economic recovery and sustained improvement in labor market,” the Federal Open Market Committee said in an Aug. 1 statement.

On the other side of the trade ledger, import growth may also be limited as the tepid U.S. labor market restrains demand. The jobless rate unexpectedly rose to 8.3 percent in July from 8.2 percent a month earlier, Labor Department figures show.

To contact the reporter on this story: Alex Kowalski in Washington at akowalski13@bloomberg.net

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

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