Bloomberg News

U.S. Economy: Four-Month Low Trade Gap May Help Growth

October 13, 2011

(Updates with closing markets in ninth paragraph.)

Oct. 13 (Bloomberg) -- The U.S. trade deficit was little changed at a four-month low of $45.6 billion in August as near- record exports helped keep the economy expanding.

The shortfall compared with a median projection of $45.8 billion in a Bloomberg News survey of economists. Shipments abroad valued at $177.6 billion were the second-highest ever, the Commerce Department said in Washington. Two other reports today signaled Americans remain pessimistic as the labor market shows few signs of improving.

Growing sales overseas, particularly to economies in Asia and Latin America, are underpinning manufacturers like Alcoa Inc. Those gains may assist in sustaining the expansion by counterbalancing the slowdown in U.S. demand that was reflected in a third consecutive drop in imports.

“Emerging markets are slowing, but they are still posting robust growth numbers, so as a result we are expecting moderate growth in exports will continue,” said Greg Daco, a senior economist at IHS Global Insight in Lexington, Massachusetts. “Imports will fall a bit as domestic demand slows. Trade will have a minor, but still positive, contribution to growth, which is something that is very much needed.”

The trade gap was projected to widen from an initially reported $44.8 billion in July, according to the median forecast of 81 economists surveyed by Bloomberg. Estimates ranged from deficits of $48.4 billion to $42 billion.

First-time claims for jobless benefits decreased by 1,000 to 404,000 last week, the Labor Department said today. The number of people on unemployment benefit rolls fell to the lowest level in six months.

Consumer Sentiment

Consumer confidence hovered last week near a record low as Americans turned more pessimistic about the state of the U.S. economy. The Bloomberg Consumer Comfort Index fell to minus 50.8 in the week ended Oct. 9 from 50.2 the prior period.

It was the fourth consecutive reading lower than minus 50, something that has happened just three previous times in its 26- year history.

Stocks fell amid lower earnings from JPMorgan Chase & Co. and concern equities rose too much on optimism about Europe’s debt crisis. The Standard & Poor’s 500 Index declined 0.3 percent to 1,203.66 at the close in New York.

After eliminating the influence of prices to render the figures used in calculating gross domestic product, the trade deficit averaged $46.5 billion in the first two months of the third quarter. The number was less than the $47.3 billion deficit average in the second quarter.

Crude Oil Imports

The Commerce Department’s figures today showed American refiners imported more crude oil and shipped more refined petroleum product abroad in August.

The increase in demand for crude oil came as the price per barrel dropped. The average price of a barrel of imported oil was $102.62 compared with $104.27 in July, today’s report showed. U.S. companies imported 302,481 barrels in August, the most in a year.

Exports were also boosted by other industrial supplies such as coal and steelmaking materials. American companies also exported more consumer goods, including pharmaceuticals.

In addition to crude oil, the U.S. imported more chemicals, foods and metals.

A stagnant labor market is weighing on the ability of U.S. households to spend on imported merchandise. The unemployment rate held at 9.1 percent in September for a third straight month, Labor Department figures showed Oct. 7. Consumer goods imports declined in August, today’s figures showed.

European Orders

Sustained gains in exports may prove difficult amid Europe’s debt crisis. Alcoa, the largest U.S. aluminum producer, this week posted profit that trailed analysts’ estimates, saying European customers cut orders on economic uncertainty.

“Fearful of a slowing economy, our European customers reduced their orders dramatically, even into September,” Chief Financial Officer Charles McLane said on a conference call.

Still, Alcoa forecast that China, the world’s largest user of aluminum, will see demand rise 17 percent this year compared with a previous projection of 15 percent.

Overseas sales also remain a source of strength for General Electric Co.

“We still see robust demand for our infrastructure products,” in the face of “the global volatility,” Jeffrey Immelt, chairman and chief executive officer of GE, said Sept. 26 in India. “We still feel quite good about our prospects on a global basis.”

U.S. Dollar

A strengthening in the U.S. dollar over the last couple months may make American-made goods more expensive for overseas customers. Since late July through yesterday, the dollar has gained about 6.2 percent against a basket of currencies of major trading partners after falling 9.1 percent in the prior 12 months.

Today’s figures showed the trade deficit with China rose to a record $29 billion as imports from the nation were the highest ever.

The U.S. Senate passed a bill this week that would allow companies to seek duties to compensate for “misaligned” exchange rates. Some U.S. lawmakers and business executives say the Chinese yuan is undervalued and unfairly boosts that country’s exports. House Speaker John Boehner said yesterday that he has “grave concerns” with the bill, casting doubt on whether it will become law.

--With assistance from Chris Middleton and Carlos Torres in Washington. Editor: Vince Golle, Carlos Torres

To contact the reporter on this story: Bob Willis in Washington at bwillis@bloomberg.net

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


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