Bloomberg News

Trade Deficit in U.S. Probably Narrowed on Cheaper Oil Imports

July 11, 2012

The trade deficit in the U.S. probably narrowed in May as falling crude oil prices and weakening demand helped trim the import bill, economists said before a report today.

The gap narrowed to $48.6 billion from $50.1 billion in April, according to the median of 70 estimates in a Bloomberg News survey. Separately, minutes of the Federal Reserve’s June meeting may shed more light on its decision to extend the maturities of assets on its balance sheet.

A lack of hiring in the U.S. that helped prompt the Fed to ease monetary policy may temper consumer spending, also translating into less demand for imports other than oil. At the same time, slowing global growth, which led central banks from Europe to China to cut interest rates this month and announce more stimulus, may trim purchases of American-made goods.

“The trade deficit should narrow a bit, reflecting a general slowing in global growth,” said Kevin Cummins, an economist at UBS Securities LLC in Stamford, Connecticut. “There is pressure on exports, particularly as areas in Europe weaken. Energy prices have come off and consumers are losing momentum, so that’ll tend to slow imports.”

The Commerce Department’s trade figures are due at 8:30 a.m. in Washington. Estimates in the Bloomberg survey ranged from deficits of $51 billion to $42.5 billion.

At 10 a.m., another report from the Commerce Department may show wholesale inventories rose in May at a slower pace than the prior month as businesses kept stockpiles lean while waiting for a pickup in sales, economists in the Bloomberg survey predicted. Stockpiles climbed 0.3 percent after a 0.6 percent April gain.

Fed Minutes

At 2 p.m. in Washington, the Fed will release minutes of its June 19-20 meeting, at which it took additional steps aimed at spurring growth. The central bank also said it stood ready to take further action to put unemployed Americans back to work.

American employers added fewer workers to payrolls than forecast in June and the jobless rate stayed at 8.2 percent as the economic outlook dimmed, Labor Department figures showed July 6. The struggling job market may subdue demand.

Retreating oil prices also may have kept a lid on the value of imports. Brent crude traded on the ICE Futures Europe exchange in London declined to $101.87 a barrel at the end of May, down from a high this year of $128.40 on March 1. It’s since fallen further.

The outlook for exports remains dim. The Bank of England, which announced July 5 that it would restart buying bonds two months after stopping, said output will likely remain sluggish after contracting in the past two quarters. The European Central Bank the same day cut its main rate to a record low as sovereign debt turmoil threatens to drive the 17-nation euro economy into a recession.

Waning Demand

Cooling overseas demand is hurting American companies like Harley-Davidson Inc. (HOG:US) A pickup in the value of the dollar against the euro, which makes U.S.-made goods less attractive to overseas buyers, is also among reasons the biggest U.S. motorcycle maker said first-quarter sales fell 1.1 percent.

“There is an impact with regards to the events and the debt crisis and consumer confidence and potential recessionary pressures in Europe on our business there,” John Olin, chief financial officer, said on a June 26 conference call. “We are seeing the pressures of a devaluing currency” as “ everything that we send to Europe is made here” in the U.S., he said.

The dollar climbed 6.7 percent in the 12 months to June 29 against a trade-weighted basket of currencies from its biggest trading partners, according to Fed data.

Machinery Makers

Slowing global demand has limited shares of equipment makers. The Standard & Poor’s Supercomposite Machinery Index (S15MACH), which includes companies like Caterpillar Inc. (CAT:US) and Deere & Co., dropped 11 percent in the two months ended June 29, while the broader S&P 500 (SPX) index fell 2.6 percent.

China, the world’s second-biggest economy, is stepping up efforts to reverse a slowdown in growth as Europe’s turmoil limits exports and domestic property restrictions curb its housing market. The Asian nation on July 5 reduced benchmark interest rates for the second time in a month.

The trade deficit with China may remain a thorny issue as the U.S. presses it to allow its currency, the yuan, to rise against the dollar and improve access to its market. President Barack Obama this month expanded trade complaints against China, accusing the nation of imposing unfair taxes on American vehicles, mostly from General Motors Co. and Chrysler Group LLC.

              Bloomberg Survey

===========================================
                             Trade  Whlsale
                           Balance     Inv.
                            $ Blns     MOM%
===========================================
Date of Release              07/11    07/11
Observation Period             May      May
-------------------------------------------
Median                       -48.6     0.3%
Average                      -48.6     0.3%
High Forecast                -42.5     0.5%
Low Forecast                 -51.0    -0.2%
Number of Participants          70       29
Previous                     -50.1     0.6%
-------------------------------------------
4CAST                        -49.5     0.2%
ABN Amro                     -49.9     ---
Action Economics             -48.0     0.4%
Aletti Gestielle             -49.0     ---
Ameriprise Financial         -50.2     0.3%
Banca Aletti                 -47.5     ---
Barclays                     -50.0     0.2%
BBVA                         -49.5     0.2%
BMO Capital Markets          -42.5     0.3%
BNP Paribas                  -49.2     ---
BofA Merrill Lynch           -48.0     ---
Briefing.com                 -50.6     0.2%
Capital Economics            -48.0     ---
CIBC World Markets           -48.8     ---
Citi                         -47.5     ---
ClearView Economics          -48.5     0.5%
Comerica                     -45.0     ---
Commerzbank AG               -48.0     ---
Credit Agricole CIB          -49.0     0.4%
Credit Suisse                -48.5     0.0%
Daiwa Securities America     -49.3     ---
Desjardins Group             -49.4     0.2%
Deutsche Bank Securities     -48.0     0.4%
Deutsche Postbank AG         -49.5     ---
Exane                        -47.8     ---
Fact & Opinion Economics     -49.0     0.4%
First Trust Advisors         -49.5     ---
FTN Financial                -49.0     ---
Goldman, Sachs & Co.         -50.5     ---
Helaba                       -47.0     ---
High Frequency Economics     -49.0     0.5%
HSBC Markets                 -48.8    -0.1%
Hugh Johnson Advisors        -48.0     ---
IDEAglobal                   -48.0     0.5%
IHS Global Insight           -47.5     0.2%
Informa Global Markets       -49.0     0.5%
ING Financial Markets        -47.5     0.4%
Insight Economics            -49.0     0.5%
Intesa Sanpaulo              -48.5     ---
J.P. Morgan Chase            -49.6     ---
Janney Montgomery Scott      -48.3     0.4%
Jefferies & Co.              -48.5     0.4%
Landesbank Berlin            -49.0     0.3%
Landesbank BW                -47.7     ---
Market Securities            -49.2     ---
Mizuho Securities            -50.0     ---
Moody’s Analytics            -50.6     ---
Morgan Stanley & Co.         -48.6     ---
National Bank Financial      -48.0     ---
Natixis                      -49.5     ---
Nomura Securities            -49.3     ---
Nord/LB                      -49.5     ---
Pierpont Securities          -48.2     ---
PineBridge Investments       -47.0     0.1%
PNC Bank                     -47.0     ---
Raiffeisenbank International -49.5     ---
Raymond James                -47.8     ---
RBC Capital Markets          -48.4     ---
Scotiabank                   -48.0     ---
Societe Generale             -47.6    -0.2%
Standard Chartered           -48.2     ---
Stone & McCarthy Research    -49.5     0.3%
TD Securities                -47.5     0.5%
UBS                          -48.5     ---
UniCredit Research           -48.0     ---
Union Investment             -47.0     ---
University of Maryland       -48.4     0.2%
Wells Fargo & Co.            -48.7     ---
Westpac Banking Co.          -49.0     ---
Wrightson ICAP               -51.0     0.3%
===========================================

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


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Companies Mentioned

  • HOG
    (Harley-Davidson Inc)
    • $58.2 USD
    • -1.14
    • -1.96%
  • CAT
    (Caterpillar Inc)
    • $99.03 USD
    • -0.80
    • -0.81%
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