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Trade Gap in U.S. Widens as Exports Start to Wane: Economy

Photographer: Ken James/Bloomberg

Container ships from Maersk Line Ltd., rear, and Hapag Lloyd, front, unload their cargo at the Port of Oakland in California. Close

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Photographer: Ken James/Bloomberg

Container ships from Maersk Line Ltd., rear, and Hapag Lloyd, front, unload their cargo at the Port of Oakland in California.

The U.S. trade deficit widened in July for the first time in four months as the global economic slowdown took a toll on American exports.

The gap grew to $42 billion from a revised $41.9 billion in June, Commerce Department figures showed today in Washington. The deficit with China climbed to a record, and it was the widest in almost five years with the European Union. Another report showed job openings in July declined.

A stagnant Europe and cooling emerging markets may further limit shipments from America’s shores, removing a source of strength for the three-year expansion. The figures coincide with a recent deceleration in U.S. manufacturing and indicate the economy will rely on consumer spending, business investment and housing to pick up the slack.

“Global demand is weakening,” said Carl Riccadonna, a senior U.S. economist at Deutsche Bank Securities Inc. in New York. “The second-half outlook is going to depend a lot on the consumers, and that means more than ever we have to stay focused on the labor data and also the confidence numbers.”

Stocks climbed amid speculation the Federal Reserve will act to stimulate the economy at a meeting of policy makers Sept. 12-13. The Standard & Poor’s 500 Index climbed 0.3 percent to 1,433.56 at the close in New York.

Job openings in the U.S. dropped in July, indicating employment growth may be hard-pressed to pick up through year- end. The number of positions waiting to be filled fell by 58,000 to 3.66 million, the Labor Department said today.

Fiscal Cliff

The so-called U.S. fiscal cliff of automatic tax increases and spending cuts at the end of 2012 is adding to the concerns of U.S. employers.

“There’s still a lot of uncertainty regarding the European economy, the pace of a general industrial recovery in China as well as the potential for a fiscal cliff in the United States,” James Shaw, chief financial officer of Donaldson Company Inc., said on an Aug. 27 earnings call.

“So we’ll continue to manage our operating expense levels cautiously in the near term,” said Shaw, whose Minneapolis- based company makes filtration systems.

In turn, persistent unemployment, which Federal Reserve Chairman Ben S. Bernanke called a “grave concern,” is limiting the consumer spending that makes up about 70 percent of the world’s largest economy.

The median forecast in a Bloomberg survey called for a trade deficit of $44 billion, with estimates of 74 economists ranging from $39.7 billion to $47.1 billion. The Commerce Department revised the June figure from an initially reported $42.9 billion.

Price Effect

After eliminating the influence of prices, which are the numbers used to calculate gross domestic product, the trade deficit widened to $46.5 billion from $44 billion a month earlier.

A narrower deficit contributed 0.32 percentage point to the 1.7 percent pace of economic growth in the second quarter, according to Commerce Department figures.

After today’s data, “we do think that the positive contribution has fully run its course,” Riccadonna said.

The U.S. posted a record $29.4 billion trade shortfall with China, while the deficit with the European Union surged 42 percent to $12 billion, the widest since October 2007. American exports to Germany were the weakest since February 2010.

Overall U.S. imports declined 0.8 percent to $225.3 billion, reflecting a drop in the value of inbound deliveries of crude oil to $25.8 billion from $26.4 billion. The cost of a barrel of crude decreased to $93.83 in July from $100.13.

Exports Fall

Exports decreased 1 percent in July to $183.3 billion as American companies shipped fewer automobiles, metals and consumer goods abroad.

Before July, U.S. exports were holding up, rising to a record $185.2 billion in June.

On the other side of the trade ledger, the value of imports may climb along with the increase in oil prices after a decline in July. Crude oil prices have since settled near a four-month high. Brent crude on the ICE Futures Europe exchange in London climbed from an intraday low of $88.49 a barrel on June 22 to a high in August of $117.03.

In a sign U.S. household demand held up in July, imports of automobiles climbed to the highest on record. Inbound shipments of other consumer goods such as mobile phones, toys and apparel also increased.

A rise in the U.S. import bill may be tempered by slower demand from American consumers and companies. Employers added a fewer-than-forecast 96,000 jobs in August, Labor Department figures showed Sept. 7. Average hourly earnings climbed 1.7 percent from August 2011, matching the smallest gain since record-keeping began in 2007.

‘Grave Concern’

“The stagnation of the labor market in particular is a grave concern,” Bernanke said in an Aug. 31 speech in Jackson Hole, Wyoming. Persistently high unemployment “will wreak structural damage on our economy that could last for many years.”

Fed officials at their July 31-Aug. 1 meeting were moving toward additional monetary policy action, according to minutes of the gathering. Many members of the panel said more stimulus will be needed “fairly soon” unless the recovery shows signs of a “substantial and sustainable strengthening.”

Barclays Plc forecasts the Federal Open Market Committee this week will announce monthly purchases of $50 billion to cut the jobless rate while holding inflation at 2 percent. Economists at Goldman Sachs Group Inc. and BNP Paribas, responding to last week’s report of slowing job growth, also say they expect an announcement of an open-ended plan on Sept. 13 after a two-day FOMC meeting.

To contact the reporter on this story: Michelle Jamrisko in Washington at mjamrisko@bloomberg.net

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

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