Bloomberg News

U.S. Trade Gap Probably Widened in August as Exports Slowed

October 13, 2011

(Updates with China trade report in sixth paragraph.)

Oct. 13 (Bloomberg) -- The U.S. trade deficit probably increased in August as a cooling in the global economy prompted American companies to ship fewer goods abroad, economists said before a report today.

The gap widened 2.2 percent to $45.8 billion, according to the median of 81 forecasts in a Bloomberg News survey. The deficit shrank in July by the most since February 2009, when the economy was in a recession, as exports of cars and capital goods rebounded. Jobless claims rose last week, other data may show.

Companies such as Alcoa Inc. may temper production as the global slowdown and Europe’s debt crisis restrain demand and limit trade flows. With fewer sales overseas and American consumers and companies reluctant to increase spending, the economy may get less of a boost from manufacturing.

“We’ve seen trade flows globally slowing as this recovery has shown signs of rolling over,” said Eric Green, chief market economist at TD Securities Inc. in New York. “Exports have been strong for the last two years, but that momentum is being exhausted.”

The Commerce Department will release the trade figures at 8:30 a.m. in Washington. Estimates ranged from deficits of $48.4 billion to $42 billion.

Hours before the U.S. data, China reported that its own exports moderated in September, with growth in shipments to Europe slumping to a year-on-year pace of 9.8 percent, from 22 percent in August, amid the euro-region’s woes. Total exports rose 17 percent, the least in seven months, and the trade surplus was $14.5 billion, the smallest since May.

Jobless Claims

The number of U.S. applications for unemployment insurance payments rose to 405,000 last week from 401,000 in the prior period, according to the median forecast of economists ahead of Labor Department data at the same time as the trade figures. Claims have averaged 415,000 so far this year.

Falling fuel prices may have limited the increase in the trade gap in August. The cost of imported petroleum dropped 2.1 percent during the month, according to figures from the Labor Department.

At the same time, Japanese-made goods keep flowing into U.S. ports as the Asian nation recovers from an earthquake and tsunami in March that delayed deliveries of parts and components as well as finished products.

Auto Industry

Nissan Motor Co. boosted September sales more than projected and industry-wide purchases were the best since April even as Toyota Motor Corp. and Honda Motor Co., still struggling to deliver enough vehicles to dealers, lost share of the U.S. market.

“The worst is behind us, and we expect to exceed year-ago sales levels beginning in October, with continued growth throughout the fourth quarter,” Bob Carter, group vice president of U.S. sales for Toyota, said last week.

Exports are showing signs of waning amid concerns of a European default and slower growth in emerging markets such as China, India and Brazil.

Alcoa, the largest U.S. aluminum producer, this week posted profit that trailed analysts’ estimates, saying European customers “dramatically” cut orders on economic uncertainty. Klaus Kleinfeld, the company’s chief executive officer, said Oct. 11 that European aluminum demand will drop 13 percent in the second half of the year from the first six months.

Europe Cutbacks

“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.

The International Monetary Fund last month cut its forecast for global growth and predicted “severe” repercussions if Europe fails to contain its debt crisis or U.S. policy makers deadlock over a fiscal plan.

The IMF lowered its forecast for growth in the euro area to 1.6 percent this year from a prior 2 percent forecast. Its U.S. growth projection was revised to 1.5 percent this year from a previous 2.5 percent. Economic growth in Mexico, the third- largest U.S. trading partner, will be 3.8 percent, down from a prior 4.7 percent estimate.

A strengthening in the U.S. dollar over the last couple months threatens to make American-made goods less competitive in the global marketplace. Since late July, the dollar has strengthened about 6.2 percent against a basket of currencies of major trading partners after falling 9.1 percent in the prior 12 months.

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 in Washington. Editors: 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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