Oct. 14 (Bloomberg) -- Companies in the U.S. are buying more foreign-made semiconductors and cars as they invest in equipment and build stockpiles, while also keeping a tight rein on payrolls, reports today showed.
The trade deficit widened 8.8 percent to $46.3 billion in August from $42.6 billion the prior month as a rise in imports swamped gains in exports, Commerce Department figures showed today in Washington. The number of Americans filing claims for jobless benefits unexpectedly climbed by 13,000 to 462,000 last week, according to the Labor Department.
Economists at Morgan Stanley cut their forecast for third-quarter growth based on the increase in imports from countries like China, while at the same time boosting estimates for business investment. The prospect that unemployment holds above 9 percent through next year and a lack of inflation are among reasons Federal Reserve policy makers may ease monetary policy.
“Companies are importing goods to increase their efficiency, and ultimately that means there is not going to be as much need for labor,” said Edward Kashmarek, an economist at Wells Fargo Securities LLC in Minneapolis. The rise is claims “is indicative of continued weakness in the labor market.”
Another Labor Department report today showed wholesale prices for goods other than food and energy rose 0.1 percent in September for a second month, a pace that signals inflation is restrained. Overall, producer costs climbed 0.4 percent, propelled by a 1.2 percent advance in the cost of food.
Most stocks dropped, dragged down by a slump in financial shares on concern over growing legal scrutiny of home foreclosure practices. The Standard & Poor’s 500 Index fell 0.4 percent to 1,173.81 at the 4 p.m. close in New York. The dollar dropped to a 15-year low against the yen on speculation efforts to ease monetary policy will erode the value of the currency.
The median forecast of 75 economists surveyed by Bloomberg News projected the trade gap would increase to $44 billion. Estimates ranged from $40 billion to $47.5 billion. The government revised the July gap to $42.6 from a previously reported $42.8 billion.
Imports from China climbed to a record $35.3 billion in August, pushing the trade shortfall with the Asian nation to $28 billion, the highest since comparable data began in 1992. Growing friction over exchange-rate and trade policy dominated discussions at the International Monetary Fund’s annual meeting in Washington this month.
Influence on GDP
The total deficit adjusted for inflation, which is the figure used to calculate gross domestic product, increased to $51.2 billion from $47.3 billion. The gap compares with the average $47.9 billion a month in the second quarter, indicating trade may have slowed growth last quarter.
The world’s largest economy grew at a 1.8 percent annual pace from July through September, down from a previously projected 2.1 percent, as the trade gap subtracted almost a percentage point from growth, according to a forecast by David Greenlaw and Ted Wieseman of Morgan Stanley in New York. They increased their estimate for business investment last quarter to a 14 percent gain from 9 percent.
Foreign purchases detract from growth because demand is being filled by producers overseas instead of American firms. U.S. imports increased 2.1 percent in August to $200.2 billion. Exports rose 0.2 percent to $153.9 billion, the most in two years.
The gain in exports reflected increasing foreign demand for food and industrial supplies. Sales of American-made semiconductors rose by $165 million for the month.
Intel Corp., the world’s biggest chipmaker, is among U.S. exporters profiting from growth overseas. The Santa Clara, California-based company this week predicted fourth-quarter sales that beat analysts’ estimates as demand in emerging economies helped weather slowing purchases among consumers in the U.S. and Europe, Intel Chief Financial Officer Stacy Smith said in an interview.
The outlook for exports is holding up as emerging economies from China to India and Brazil modernize their infrastructure and more affluent households can afford to buy goods and services from abroad. Sales to Brazilian companies climbed to a record $3.4 billion in August, giving the U.S. a $1.3 billion surplus with Latin America’s biggest economy, the highest ever.
A drop in the value of the dollar, by making U.S. goods cheaper to foreign buyers, may keep boosting exports. From a one-year high reached June 7 through Oct. 12, the U.S. dollar weakened 7.2 percent against a trade-weighted basket of currencies.
By comparison, the dollar has lost 2.7 percent against China’s currency, the yuan, over the past four months.
At the IMF meetings in Washington, Treasury Secretary Timothy F. Geithner and European Central Bank President Jean-Claude Trichet were among those to signal irritation that China is restraining its currency to aid exports even as its economy outpaces that of other members of the Group of 20. Leaders of emerging economies blamed a flood of capital that is pushing up their currencies on too-low U.S. interest rates.
The Treasury Department’s next foreign exchange report to Congress is due tomorrow, although the department has not said whether it will be released on time. In its previous report, released in July after a three-month delay, the Treasury did not brand China a currency manipulator, saying instead that the yuan was undervalued and would be monitored closely.
U.S. impatience with China boiled over on Sept. 29 when the House of Representatives passed a measure that would let American companies seek import duties to prevent Chinese manufacturers from using an artificially weak yuan as a competitive tool. The measure won’t go to the Senate until after U.S. congressional elections in November.
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