Bloomberg News

Trade Gap in U.S. Probably Widened in April to 10-Month High

June 09, 2011

June 9 (Bloomberg) -- The U.S. trade deficit probably widened in April to a 10-month high as the climbing cost of foreign oil overshadowed a drop in auto imports, economists said before a report today.

The gap grew to $48.8 billion from $48.2 billion in March, according to the median of 75 estimates in a Bloomberg News survey. Another report may show fewer people filed claims for jobless benefits last week.

A drop in shipments of vehicles and parts from earthquake- stricken Japan may have temporarily prevented the flow of goods into the U.S. from rising even further as oil prices climbed to the highest level since 2008. At the same time, a 9.9 percent drop in the dollar over the past 12 months will probably help underpin overseas sales at manufacturers like Dow Chemical Co.

“Oil prices are the big factor,” said Scott Brown, chief economist at Raymond James & Associates Inc. in St. Petersburg, Florida. “But there may also be some supply chain disruptions from Japan’s earthquake and tsunami, and those both move in opposite directions. We’ve also seen exports improving in recent months.”

The Commerce Department’s trade figures are due at 8:30 a.m. in Washington. Estimates in the Bloomberg survey ranged from gaps of $42 billion to $52 billion.

The number of applications for unemployment insurance payments fell to 419,000 last week from 422,000 the prior period, according to the median forecast of economists surveyed ahead of Labor Department data at 8:30 a.m. Claims would exceed the 414,000 a week average so far this year, showing firings have picked up.

Improving Confidence

Also today, the Bloomberg Consumer Comfort Index for last week is due at 9:45 a.m. New York time. The measure climbed in the prior two weeks as gasoline prices retreated, snapping a monthlong slide that sent confidence to a nine-month low.

Rising fuel prices probably accounted for the projected increase in the trade gap. Crude-oil futures on the New York Mercantile Exchange reached $113.93 a barrel on April 29, the highest level since September 2008. The price has since dropped, closing at $102.7 a barrel on May 31, a sign fuel imports cooled last month.

At the same time, the disaster in Japan may have curtailed the gain in imports. Supply disruptions caused by the earthquake and tsunami will cut vehicle production in America and Japanese exports to the U.S. by a combined 300,000 to 400,000 units in the second quarter, Ellen Hughes-Cromwick, chief economist at Dearborn, Michigan-based Ford Motor Co., said during a June 1 conference call with analysts.

Slower Growth

The rise in fuel prices and the disaster in Japan have taken a toll on the U.S. economy, recent reports showed. Consumer spending grew less than forecast in April, according to Commerce Department data. Manufacturing expanded in May at the slowest pace in more than a year, the Institute for Supply Management said last week.

Employers in May also added the fewest number of workers in eight months and the jobless rate unexpectedly increased to 9.1 percent, further raising the risk of an economic slowdown, Labor Department figures showed June 3.

Federal Reserve Chairman Ben S. Bernanke is among policy makers projecting the softening in growth will be temporary. Bernanke this week said the economy is likely to pick up as fuel prices moderate and disruptions of parts supplies ease as factories in Japan recover.

Dollar, Exports

The drop in the value of the dollar against a trade- weighted basket of currencies from the country’s biggest trading partners may be one reason for optimism. A weaker dollar benefits American companies by making their products more attractive to buyers overseas.

“The low dollar means we can export, so we are actually fundamentally growing globally from the U.S.,” Andrew Liveris, president and chief executive officer at Dow Chemical, said during a June 2 conference call. “We see strong growth drivers in emerging regions. China is the locus of growth.”

Dow, based in Midland, Michigan, also expects “a short- term boost in Japan as that country rebuilds from its recent tragic natural disaster,” Liveris said.

--With assistance from Chris Middleton in Washington. Editors: Carlos Torres, Kevin Costelloe

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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