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Trade Deficit in U.S. Probably Widened in July as Exports Waned

Container ships from Maersk Line Ltd., rear, and Hapag Lloyd, front, unload their cargo at the Port of Oakland in California. 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. Photographer: Ken James/Bloomberg

The U.S. trade deficit probably widened in July after shrinking to the lowest level since December 2010 as a slowing global economy limited demand for American-made goods, economists said before a report today.

The gap grew to $44 billion during the month from $42.9 billion in June, according to the median forecast of 74 economists surveyed by Bloomberg. A widening of the shortfall would be the first since March.

A stagnant Europe and weaker economies in emerging markets such as China may start sapping demand for U.S. products, a source of strength for the expansion in the second quarter. At the same time, a pickup in crude oil prices may lead to a higher American import bill.

“Slow growth abroad and deepening recession in Europe” may “finally put a dent” in U.S. exports, said Guy Berger, an economist at RBS Securities Inc. in Stamford, Connecticut. “Petroleum prices are putting up some pressure on the deficit.”

The Commerce Department’s trade report is due at 8:30 a.m. in Washington. Estimates in the Bloomberg survey ranged from gaps of $39.7 billion to $47.1 billion.

Even with the global economic slowdown, U.S. exports have held up, rising to a record $185 billion in June. A narrower trade deficit contributed 0.32 percentage point to the 1.7 percent pace of economic growth in the second quarter, according to Commerce Department figures.

Europe, China

European countries, struggling with a sovereign debt crisis, and a cooling of the expansion in China remain obstacles to U.S. export growth.

In Europe, the U.K. economy shrank 0.5 percent in the second quarter, the weakest performance since the first three months of 2009, the government reported Aug. 24. Italy’s economy contracted for a fourth straight quarter in the three months through June, the government said Aug. 7, as manufacturing slumped and the euro-area debt crisis intensified.

The Chinese economy has decelerated for six straight quarters. Manufacturing slowed further in August, surveys of purchasing managers showed earlier this month, with one gauge at its lowest level since March 2009.

“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 Minneapolis-based 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 company makes filtration systems.

Oil Prices

On the other side of the trade ledger, oil prices may start to boost the value of imports. The cost of imported petroleum products decreased 1.6 percent in July from the prior month, compared to June’s 9.3 percent drop, the Labor Department said Aug. 10.

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.

A rise in the U.S. import bill may be tempered by slower consumer and corporate demand. 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.

Fed’s Bernanke

“The stagnation of the labor market in particular is a grave concern,” Federal Reserve Chairman Ben S. 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.

            Bloomberg Survey
                            $ Blns
Date of Release              09/11
Observation Period            July
Median                       -44.0
Average                      -43.8
High Forecast                -39.7
Low Forecast                 -47.1
Number of Participants          74
Previous                     -42.9
4CAST Ltd.                   -45.2
ABN Amro Inc.                -43.2
Action Economics             -43.5
Aletti Gestielle             -44.5
Ameriprise Financial Inc     -44.5
Banca Aletti & C spa         -43.3
Bank of the West             -43.2
Barclays                     -44.5
BBVA                         -43.3
BMO Capital Markets          -42.8
BNP Paribas                  -44.3
BofA Merrill Lynch Resear    -44.0                 -46.0
Capital Economics            -45.0
CIBC World Markets           -43.0
Citi                         -42.5
ClearView Economics          -44.0
Comerica Inc                 -45.0
Commerzbank AG               -45.0
Credit Agricole CIB          -42.5
Credit Suisse                -40.0
Daiwa Securities America     -43.5
DekaBank                     -44.5
Desjardins Group             -43.6
Deutsche Bank Securities     -44.0
Deutsche Postbank AG         -45.0
Fact & Opinion Economics     -44.5
First Trust Advisors         -44.7
FTN Financial                -41.6
Goldman, Sachs & Co.         -43.0
Helaba                       -46.0
High Frequency Economics     -44.5
HSBC Markets                 -42.5
Hugh Johnson Advisors        -45.3
IDEAglobal                   -45.0
IHS Global Insight           -44.4
Informa Global Markets       -45.0
Insight Economics            -45.0
Intesa Sanpaulo              -44.5
J.P. Morgan Chase            -43.4
Janney Montgomery Scott L    -47.1
Jefferies & Co.              -45.9
Landesbank Berlin            -44.8
Landesbank BW                -45.0
Lloyds Bank Wbm              -44.0
Market Securities            -41.0
Mizuho Securities            -44.0
Moody’s Analytics            -43.4
Morgan Stanley & Co.         -44.5
National Bank Financial      -44.0
Natixis                      -41.2
Newedge                      -44.7
Nomura Securities Intl.      -45.0
Nord/LB                      -43.5
Pierpont Securities LLC      -42.9
PineBridge Investments       -40.2
PNC Bank                     -45.0
Raiffeisenbank Internatio    -43.0
Raymond James                -46.4
RBC Capital Markets          -45.2
RBS Securities Inc.          -44.0
Regions Financial Corp       -44.4
Scotiabank                   -43.2
SMBC Nikko Securities        -40.0
Societe Generale             -39.7
Standard Chartered           -44.5
Stone & McCarthy Research    -41.8
TD Securities                -42.5
UBS                          -45.0
Union Investment             -44.0
University of Maryland       -45.7
Wells Fargo & Co.            -42.0
Westpac Banking Co.          -44.0
Wrightson ICAP               -42.0

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