Bloomberg News

Trade Gap Probably Widened as Imports Grew: U.S. Economy Preview

February 09, 2012

Feb. 5 (Bloomberg) -- The trade deficit in the U.S. probably widened in December to a six-month high as imports climbed faster than exports, economists said a report this week will show.

The gap grew to $48.5 billion from the $47.8 billion shortfall in November, according to the median of 61 estimates in a Bloomberg News survey ahead of Commerce Department figures on Feb. 10. Consumer sentiment held close to a one-year high and firings were little changed, other reports may show.

Imports will probably keep rising as an improving job market underpins consumer spending, and businesses rebuild inventories and replace outdated equipment. At the same time, demand from emerging markets is boosting sales at companies like General Electric Co. and Caterpillar Inc., buffering the fallout from Europe’s debt crisis and helping to sustain exports.

“We should see a bit of a pickup in imports as the economy and the consumer are doing better,” said Stephen Stanley, chief economist at Pierpont Securities LLC in Stamford, Connecticut. “A lot of our exports are going to places such as Asia, where the economies are growing.”

Payrolls climbed by 243,000 workers in January, the biggest increase in nine months, Labor Department figures showed on Feb. 3. The unemployment rate fell to 8.3 percent, the lowest since February 2009.

Stocks Rally

Stocks rallied after the report fueled optimism the economy will withstand the European debt crisis. The Standard & Poor’s 500 Index has increased for five straight weeks, the longest winning streak in a year. The gauge is off to the best start to a year since 1987.

Rising oil costs may lift the import bill this year. The price of Brent crude traded on the ICE Futures Europe exchange in London was $114.54 as of last week, up 6.6 percent from $107.38 at the end of December.

Exporters may continue to see gains. Caterpillar, the largest construction and mining equipment maker, posted fourth- quarter profit that beat analysts’ estimates and said prospects for global growth have improved. It also projects more orders as pent-up demand is released and customers replace older products.

“We’re expecting 2012 to be another year of good growth,” Doug Oberhelman, chairman and chief executive officer of the Peoria, Illinois-based company, said in a Jan. 26 statement. “2011 was a record-breaking year for U.S. exports,” which “supported thousands of jobs in the United States.”

Asian Economies

China, the world’s second-biggest economy, expanded 8.9 percent in the fourth quarter from a year earlier, exceeding the Bloomberg survey median forecast. An index of India’s services industry rose in January at the fastest pace in six months, and manufacturing accelerated.

“The emerging markets continue to be very strong,” Jeffrey Immelt, chief executive officer of General Electric, said on a Jan. 20 conference call with investors. “There are a few challenged markets like Europe and appliances, but on balance, we have a positive outlook.”

A weaker dollar will help keep U.S. goods competitive. Since a recent high on Dec. 14, the dollar has declined 3 percent against a trade-weighted basket of currencies from the country’s biggest trading partners.

The trade deficit with China remains a thorny issue as the U.S. presses the Asian country to allow the yuan to rise against the dollar. President Barack Obama, in his State of the Union address, said last month he is creating a trade enforcement group that would use investigators and other federal resources to combat unfair trade practices by nations including China.

Jobless Claims

Among other reports this week, Labor Department figures due on Feb. 9 may indicate the improvement in the job market extended into this month. Initial jobless claims were little changed last week at 370,000 after 367,000 in the prior period, according to the median forecast in the Bloomberg survey. Unemployment insurance claims averaged 409,000 a week in 2011.

The improvement in the labor market is bolstering confidence. The Thomson Reuters/University of Michigan preliminary consumer sentiment index for February eased to 74 from January’s one-year high of 75, economists in the Bloomberg survey forecast ahead of Feb. 10 data.

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

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 in Washington at cwellisz@bloomberg.net


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