US trade gap widens in imports

September 11, 2009
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, WASHINGTON, Sep 11 – The US trade deficit widened in July amid a record surge in imports and rising trade volume, government data showed Thursday in a fresh sign the economy is emerging from recession.

The Commerce Department reported the trade gap jumped to 32.0 billion dollars, from a revised 27.5 billion dollars in June and eclipsing the average analyst forecast of 27.4 billion dollars.

The trade shortfall was 16.3 percent higher than the previous month, the largest percentage increase in more than 10 years.

The report added to recent signs of a nascent recovery in the world\’s largest economy and around the world from the worst downturn in six decades.

"We are seeing steady growth in exports, suggesting that we are moving into a synchronized global expansion," said Brian Bethune of IHS Global Insight.

First Trust\’s Brian Wesbury said the revival of international trade "supports the case that the US economy — as well as some economies abroad, particularly in Asia — are in a V-shaped recovery."

The US trade gap had fallen in May to the lowest level since November 1999 as the global economic crisis strangled trade flows. In July, the trade deficit was 47 percent below the year-ago level.

Trade volume, which had fallen for nine consecutive months from August 2008 to April 2009, jumped 3.6 percent in July, after a 2.3 percent rise in June.

For the US economy, Joel Naroff of Naroff Economic Advisors saw a glass half-full in the report.

"While wider trade deficits are normally not good news, in this case, the rise in demand for foreign consumer and business goods tells us the US economy is healing," said Christopher Cornell of Moody\’s Economy.com. agreed, saying the data confirmed the US economy had "turned the corner" from recent sharp declines.

"The stage is set for recovery that we all hope will take flight in the coming months," he added.

Imports rose 4.7 percent to 159.6 billion dollars, the highest monthly increase since the Commerce Department began publishing the data in 1992.

"The impressive import numbers, if they hold up, point to a pickup in US consumer spending," said Jennifer Lee of BMO Capital Markets.

Imports rose in most categories, led by a 21.5 percent surge in imports of autos and parts.

Ian Shepherdson, chief US economist at High Frequency Economics, said that while the government\’s popular cash-for-clunkers auto scrappage program accounted for nearly half the gain in imports, "the underlying trend in the deficit is still downwards."

Imports of industrial supplies rose by 3.9 percent, consumer goods by 5.0 percent and capital goods by 4.5 percent. Food imports were the exception, falling 0.9 percent.

The politically sensitive trade deficit with China widened sharply, as imports increased by the strongest pace since November 2008, pushing the yawning gap up 2.0 billion dollars to 20.4 billion dollars.

Critics accuse China, the United States\’s second-largest trading partner after Canada, of manipulating its yuan currency to gain an unfair trade advantage.

Exports rose to 127.6 billion dollars, a 3.2 percent increase from June that was the strongest gain since May 2008, due in part to a 24.5 percent jump in autos and parts.

The oil deficit increased by 600 million dollars to 17.9 billion dollars. The average price of imported crude oil climbed for the fifth month running, to 62.48 dollars a barrel, a gain of 59 percent from February.

The trade deficit with Canada rose to 2.2 billion dollars from 1.5 billion dollars and that with the European Union vaulted to 8.0 billion dollars from 4.5 billion dollars.

With Japan, the gap widened to 3.9 billion dollars from 3.7 billion dollars.
 

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