Bloomberg News

Trade Gap Was Probably Little Changed: U.S. Economy Preview

November 09, 2011

Nov. 6 (Bloomberg) -- The U.S. trade deficit was probably little changed in September as slowing global growth put the brakes on exports and imports, economists said before a report this week.

The shortfall widened to $46.2 billion from $45.6 billion in August, according to the median forecast of 58 economists surveyed by Bloomberg News before the Nov. 10 Commerce Department report. July and August were the two strongest months on record for sales overseas.

Exports may taper off as Europe heads toward what its new central bank chief calls a “mild recession,” while China and other emerging economies cool. By the same token, what Federal Reserve Chairman Ben S. Bernanke said was a “frustratingly slow” U.S. recovery will probably curb American demand for goods from abroad.

“Exports have kind of flattened out in recent months,” Jay Bryson, senior global economist at Wells Fargo Securities LLC in Charlotte, North Carolina. “As we go into the fourth quarter, we could see the balance getting worse, as some trading partners like Europe are seeing lousy growth.”

Estimates for the trade gap in the Bloomberg survey ranged from $42 billion to $49.5 billion.

The European Central Bank’s new president, Mario Draghi, last week told reporters the euro zone was experiencing “slow growth” that will turn into a “mild” economic slump. He spoke in Frankfurt after presiding over a surprise rate cut.

Sales Cool

Companies like DuPont Co. and Whirlpool Corp. are among those already witnessing a slowdown.

“There are parts of Europe that are in, or near, recession,” Ellen Kullman, Wilmington, Delaware-based DuPont’s chairman and chief executive officer, said on an Oct. 25 conference call. “In North America, we see a slow recovery continuing. We remain positive on Asia,” and expect a “soft landing in China.”

Benton Harbor, Michigan-based Whirlpool, the world’s largest maker of household appliances, last week said it will cut more than 5,000 jobs and reduce capacity by six million units after lowering its earnings targets as consumers rein in spending. Whirlpool said reductions in Europe and North America account for about 10 percent of all employees in those regions.

“During the quarter, we experienced weaker than expected global industry demand and elevated material costs,” Chief Executive Officer Jeff M. Fettig said in the statement. “Our results were negatively impacted by recessionary demand levels in developed countries, a slowdown in emerging markets.”

Import Prices

A Labor Department report Nov. 10 may show prices of imported goods rose 0.1 percent in October after a 0.3 percent gain the prior month, according to the median estimate in a Bloomberg survey.

A drop in the value of the dollar has helped spur exports and boost the cost of imports. The Dollar Index, which IntercontinentalExchange Inc. uses to track the currency against that of six major trade partners including the euro and yen, fell 18 percent from June 7, 2010 to April 29 as the U.S. economy cooled. It has since trimmed that loss as the crisis in Europe deepened.

Reports on jobless claims and consumer confidence will round out the rest of the week. The number of applications for unemployment insurance payments rose to 400,000 last week from 397,000 in the prior period, according to the median forecast of economists ahead of Labor Department data also due Nov. 10. Claims have averaged 414,000 so far this year.

The government agency reported last week that the jobless rate fell to 9 percent in October, and payrolls rose by 80,000 workers, the smallest gain in four months.

The Reuters/University of Michigan preliminary sentiment survey for November was little changed at 61.5 from 60.9 at the end of October, according to the survey median. The results will be released Nov. 11. The measure’s average reading during the six-year expansion that ended in December 2007 was 88.9.

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

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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