Trade Deficit in U.S. Probably Narrowed in June on Cheaper Oil

The U.S. trade deficit probably narrowed in June as less expensive oil helped cut the nation’s import bill, economists said before a report today.

The gap shrank to $47.5 billion, a four-month low, from $48.7 billion in May, according to the median forecast of 69 economists surveyed by Bloomberg. A separate report may show initial jobless claims rose, signaling progress in the labor market is limited.

A jobless rate that has topped 8 percent for more than three years is also leading to a slackening in American consumer spending that may further curb imports. At the same time, slowing economies in Europe and Asia threaten orders to U.S. manufacturers, indicating exports will also languish.

“The story is really about oil prices, which continued to decline in June,” said Jacob Oubina, a senior economist at RBC Capital Markets LLC in New York. “Exports and capital spending have both benefited greatly from global economic activity, but if you get a significant slowing in that activity, which we are seeing at the moment, then that could weigh on these two pillars of growth.”

The Commerce Department’s trade report is due at 8:30 a.m. Washington time. Estimates in the Bloomberg survey ranged from gaps of $44 billion to $50 billion.

Also at 8:30 a.m., a Labor Department report is projected to show applications for jobless benefits rose 5,000 last week to 370,000, according to the Bloomberg survey median.

Global Slowdown

Exports may be hard-pressed to pick up as countries in Europe teeter near recession and China’s expansion cools.

The U.K.’s economy shrank 0.7 percent in the second quarter, the most since 2009, a government report showed July 25. Italy’s economy contracted 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.

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.”

Declining Exports

Manufacturing is suffering from the global slump. 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.

That may help explain why shares of equipment makers have lagged behind the broader market. The Standard & Poor’s Supercomposite Machinery Index (S15MACH), which includes companies like Eaton Corp. and Deere & Co., has gained 6 percent this year while the S&P 500 (SPX) index has risen 12 percent.

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.

Oil Prices

On the other end of the trade ledger, retreating oil prices probably restrained the value of imports in June. The cost of imported petroleum decreased 11 percent from the prior month, the biggest decline since December 2008, the Labor Department said July 12.

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.

Import growth may also be restrained as the struggling U.S. labor market slows demand. The jobless rate unexpectedly rose to 8.3 percent in July from 8.2 percent a month earlier, Labor Department figures showed Aug. 3.

                       Bloomberg Survey

============================================
                             Trade  Initial
                           Balance   Claims
                            $ Blns   ,000’s
============================================

Date of Release              08/09    08/09
Observation Period            June    4-Aug
--------------------------------------------
Median                       -47.5      370
Average                      -47.5      369
High Forecast                -44.0      385
Low Forecast                 -50.0      359
Number of Participants          69       43
Previous                     -48.7      365
--------------------------------------------
4CAST                        -48.3      365
ABN Amro                      ---       365
Action Economics             -48.0      361
Ameriprise Financial         -48.0      370
Banca Aletti                 -47.0     ---
Barclays                     -47.8      360
BBVA                         -48.3      365
BMO Capital Markets          -47.5     ---
BNP Paribas                  -47.1      368
BofA Merrill Lynch           -46.5      370
Briefing.com                 -48.0      385
Capital Economics            -47.7     ---
CIBC World Markets           -46.7     ---
Citi                         -46.5      370
ClearView Economics          -48.0     ---
Comerica                     -46.5     ---
Commerzbank AG               -47.5      365
Credit Agricole CIB          -47.5     ---
Credit Suisse                -48.0      370
Daiwa Securities America     -47.5     ---
DekaBank                     -47.3     ---
Desjardins Group             -47.3      370
Deutsche Bank Securities     -48.0      375
Deutsche Postbank AG         -47.0     ---
DZ Bank                      -49.1     ---
First Trust Advisors         -48.1      365
FTN Financial                -47.0     ---
Goldman, Sachs & Co.         -48.9     ---
Helaba                       -46.5      370
High Frequency Economics     -48.7      375
Horizon Investments          -46.5     ---
HSBC Markets                 -45.5      366
Hugh Johnson Advisors        -49.0     ---
IDEAglobal                   -50.0      370
IHS Global Insight           -47.6     ---
Informa Global Markets       -47.3      375
ING Financial Markets        -47.2      365
Insight Economics            -48.5      375
Intesa Sanpaulo              -48.0     ---
J.P. Morgan Chase            -46.8      370
Janney Montgomery Scott      -46.5     ---
Jefferies & Co.              -48.0      370
John Hancock Financial        ---       362
Landesbank Berlin            -48.0      375
Landesbank BW                -48.0     ---
Lloyds Bank                  -47.0      370
Maria Fiorini Ramirez         ---       370
Market Securities            -47.6     ---
Mizuho Securities            -49.0      370
Moody’s Analytics            -47.9      363
Morgan Stanley & Co.         -47.0      365
National Bank Financial      -47.5     ---
Natixis                      -47.3     ---
Nomura Securities            -46.5     ---
Pierpont Securities          -45.0     ---
PineBridge Investments       -44.0      359
PNC Bank                     -48.0     ---
Raiffeisenbank International -47.5     ---
Raymond James                -47.6      370
RBC Capital Markets          -47.6      370
RBS Securities               -47.0      370
Regions Financial            -47.4     ---
Scotiabank                   -47.0      375
SMBC Nikko Securities        -48.0     ---
Societe Generale             -47.2      367
Stone & McCarthy Research    -47.3      365
TD Securities                -47.2      372
UBS                          -48.0      360
UniCredit Research           -48.0     ---
University of Maryland       -47.7      370
Wells Fargo & Co.            -46.7     ---
Westpac Banking Co.           ---       385
Wrightson ICAP               -48.5      365
============================================

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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