Trade Deficit in the U.S. Probably Widened as Imports Increased
December 11, 2011, 10:31 AM ESTBy Shobhana Chandra
Dec. 9 (Bloomberg) -- The trade deficit probably widened in October as a strengthening U.S. economy helped drive up the nation’s import bill while exports cooled from a record high.
The gap grew to $44 billion from the prior month’s $43.1 billion shortfall that was the smallest this year, according to the median estimate of 79 economists surveyed by Bloomberg News. Consumer sentiment rose to a six-month high in December, another report may show.
Import growth may be sustained as the world’s largest economy shows signs of strength entering 2012. Demand from developing nations that has been driving sales at companies such as Dow Chemical Co. may help cushion the U.S. from any slowdown in Europe.
“Consumer spending picked up so we can expect imports to have increased,” said Neil Dutta, an economist at Bank of America Corp. in New York. “The global trade cycle may have stalled as the European sovereign-debt crisis intensified in October. Longer term, the story is still one of rising exports and an ongoing narrowing of the trade gap.”
The Commerce Department will release the trade figures at 8:30 a.m. in Washington. Estimates in the Bloomberg survey ranged from $40.3 billion to $46 billion.
The dollar has fallen 11 percent since a post-recession peak in June 2010 against the currencies of six major trade partners as tracked by IntercontinentalExchange Inc.’s Dollar Index. The drop makes American goods cheaper abroad and is spurring manufacturing, which expanded in November at the fastest pace in five months, according to the Institute for Supply Management.
‘Fairly Strong’
Manufacturers benefiting from overseas demand include Dow, the largest U.S. chemical maker. The Midland, Michigan-based company is prepared for “slower and jagged” global growth next year, and “exports have actually stood fairly strong for Dow” in Asia, according to Chief Financial Officer William Weideman.
“The U.S. and Western Europe will continue to see slow growth for the next several quarters due to high unemployment, weak construction markets, and lower consumer confidence due to the sovereign debt concerns,” Weideman said in a Dec. 6 conference call with investors. “This will be offset by ongoing resilience in the emerging geographies.”
U.S. exports, a driver of the expansion, will advance in 2012 even as a sovereign-debt crisis pushes Europe into recession, according to Joseph Carson, director of global economic research at AllianceBernstein LP. Faster growth in developing markets will cushion the slowdown in demand from the euro area, whose share in exports has dwindled to 13 percent.
Consumer Spending
Imports also may keep climbing as gains in consumer spending, which accounts for about 70 percent of the economy, encourage companies to replenish shelves. Inventories at wholesalers rose in October by the most in five months as distributors moved to bring stockpiles in line with demand, Commerce Department figures showed yesterday.
Americans were less pessimistic in early December, according to the Thomson Reuters/University of Michigan preliminary index of sentiment. A reading of 65.8 is the median estimate in the Bloomberg survey after 64.1 in November. The figures will be released at 9:55 a.m.
Trade may contribute to the expansion in the final three months of this year after adding 0.5 percentage point to economic growth in the July-to-September quarter. The economy expanded at a 2 percent annual rate in the period.
China’s trade surplus with the U.S. remains an irritant in relations between the world’s two largest economies. President Barack Obama last month renewed pressure on China’s foreign- exchange policy and trade practices, saying “enough’s enough” on what the U.S. views as too-slow appreciation of the yuan.
China sees an increase in domestic costs and a slowdown in overseas demand putting “severe” pressure on its exports next year, a sign policy makers may have little appetite to allow faster gains in its currency. Premier Wen Jiabao’s embrace of higher wages, along with a jump in land and raw-materials prices and a stronger yuan, are restraining shipments, the Commerce Ministry said on Dec. 7.
--With assistance from Chris Middleton in Washington. Editors: Vince Golle, Christopher Wellisz
To contact the reporter on this story: Shobhana Chandra in Washington at schandra1@bloomberg.net
To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net
