The trade deficit in the U.S. widened in October as the biggest slump in exports in almost four years outweighed a drop in imports, evidence of the slowdown in global growth.
The trade gap grew 4.9 percent to $42.2 billion from a revised $40.3 billion in September that was smaller than previously estimated, the Commerce Department reported today in Washington. The median forecast in a Bloomberg News survey of 70 economists called for the deficit to expand to $42.7 billion. Exports declined 3.6 percent, the most since January 2009.
The decrease in exports, which may have been exacerbated by the drought in the Midwest that caused sales of soybeans to plunge, was nonetheless broad-based, indicating cooling economies from Europe to Asia may be sapping demand for American goods, once a mainstay of the economic recovery. The slowdown in imports, which affected everything from electronics to clothing and chemicals, may also be signaling slower U.S. growth.
“The export trend is clearly slowing, and that means the export engine is faltering,” said Carl Riccadonna, a senior U.S. economist at Deutsche Bank Securities Inc. in New York, who projected the gap would grow to $42 billion. “The outlook seems more of the same for growth.”
Stock-index futures held earlier gains after the report as German investor confidence climbed and traders awaited progress on federal budget talks in Washington. The contract on the Standard & Poor’s 500 Index maturing this month rose 0.2 percent to 1,423.5 at 8:49 a.m. in New York.
Bloomberg survey estimates for the trade gap ranged from $40 billion to $44.6 billion. The Commerce Department revised the deficit for September to an almost two-year low from an initially reported $41.5 billion.
The value of exports dropped to $180.5 billion, the lowest since February, from $187.3, today’s report showed. Overseas sales of soybeans slumped by $1.13 billion during the month, and aircraft demand, which is also often volatile, decreased by $1.02 billion. Foreign purchases of engines, industrial machinery, petroleum products were among the other categories that also saw decreases.
Superstorm Sandy, which closed ports in New Jersey in late October and early November, may have been one reason the shipment of U.S. goods decreased.
European countries struggling with a sovereign debt crisis and a cooling expansion in China remain obstacles to U.S. export growth. Growth in China’s overseas shipments slowed to 2.9 percent in November from 11.6 percent in October and exports to the U.S. fell 2.6 percent last month from a year earlier, the first decline since February 2011, according to data released this month by the customs administration in Beijing.
Political leaders in China have laid out a plan to boost per capita income and double economic growth.
“After running double-digits growth for over a decade, we start to see China GDP moderating,” Weiwei Chen, chief financial officer of Yum! Brands’ (YUM:US) China division, said at a Dec. 6 conference. “We all know that the past strong growth was largely supported by export and investment, yet we expect, per the government’s plan, that consumption will play an ever greater role in continued economic growth.”
The U.S. trade gap with China widened to a record in October, as both imports and exports were the highest ever, today’s report showed.
Imports declined 2.1 percent to $222.8 billion, the lowest level since April 2011, from $227.6 billion in the prior month, led by a $1.32 billion plunge in cell phones, today’s report showed. The decrease followed a surge in September that coincided with the introduction of the latest Apple Inc. iPhone.
While U.S. job gains are helping sustain consumer spending, fiscal tightening slated for early next year threatens growth and might set back employment. Employers added 146,000 jobs in November, the Labor Department reported last week.
Today, Federal Reserve policy makers begin a two-day meeting at which they’ll consider whether to supplement their $40 billion a month of mortgage-bond purchases with Treasury purchases as well once their Operation Twist program expires at the end of the month.
Adjusted for prices, which are the figures used to calculated gross domestic product, the trade gap narrowed to $46.2 billion in October from $46.6 billion the prior month, today’s report showed.
Trade contributed 0.14 percentage point to GDP in the third quarter, and the October reading is an early sign it will help underpin growth this quarter.
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