By Bob Willis
Dec. 11 (Bloomberg) -- The U.S. trade deficit probably narrowed in October to the lowest level in three years as plunging oil prices led to a drop in imports, economists said before a report today.
The gap shrank 5.3 percent to $53.5 billion, the smallest since March 2005, according to the median forecast of economists surveyed by Bloomberg News. A separate report may show that, for a fifth consecutive week, more than half a million workers sought jobless benefits for the first time as the job market weakened.
American households and businesses are retrenching, deepening the recession and signaling purchases of foreign oil and consumer and capital goods will keep softening. The global credit crunch is also slowing growth in Europe, Asia and Latin America, eroding demand for American products and making it unlikely the trade gap will improve much more in 2009.
“The combination of global recession and the global credit crunch is causing worldwide trade to dry up,” said John Silvia, chief economist at Wachovia Corp. in Charlotte, North Carolina.
Estimates of the 70 economists surveyed ranged from deficits of $47 billion to $57.5 billion. The report is due at 8:30 a.m.
At the same time, figures from the Labor Department may show 525,000 people filed initial claims for unemployment insurance last week compared with 509,000 the prior week, according to economists surveyed. U.S. employers have cut 1.9 million workers from payrolls so far this year, the government said last week.
Prices Fall
Also at 8:30, a second report from Labor may show prices for imported goods fell 4.9 percent in November, according to the survey median. It would surpass October’s 4.7 percent decline as the biggest drop since records began in 1989.
Plunging oil prices are at the center of the improvement in trade and the decrease in import costs.
Prices for imported petroleum fell 16.7 percent in October, the biggest monthly decline in more than five years, according to government data.
A decrease in airplane deliveries by Boeing Co., reflecting the effects of a two-month strike that was resolved Nov. 1, contributed to the expected softening in American exports. Boeing delivered four aircraft overseas in October, down from six in the prior month, according to company data.
Demand for American-made goods is likely to falter in coming months as economies in Europe and Asia weaken and more companies shelve investment plans.
Cutting Jobs
Cummins Inc., the maker of more than a third of North America’s heavy-duty truck engines, said this month it will eliminate at least 500 jobs by the end of the year because of “continued deterioration” in the U.S. economy and other key markets. Cummins said in October that sales growth will be about 12 percent this year, lower than it previously forecast, as the U.S. and European economies weakened.
“Cummins already has taken a number of actions across the company to try to bring costs in line with our reduced current demand,” Chief Executive Officer Tim Solso said in a Dec. 5 statement. “Despite those efforts, we have now reached a point where we will have to take more significant steps to reduce our professional workforce around the world.”
Reflecting the falling demand for machinery, the Standard & Poor’s Industrial Machinery Composite Index is down 42 percent so far this year, compared with a 39 percent decline for the S&P 500 Index.
Shrinking Growth
Japan’s economy will shrink 0.2 percent in 2009, while the euro area will contract 0.5 percent, according to a revised forecast by the International Monetary Fund last month. Its global growth estimate for 2009 was scaled back to 2.2 percent from 3.7 percent this year.
International trade next year may shrink 2.1 percent, the first contraction in more than a quarter century, the World Bank said in a report this week.
A rebound in the value of the dollar, by making American- made products more expensive to overseas buyers, is contributing to the dimming outlook for U.S. exports. The dollar jumped 17 percent from mid-July to the end of November, reaching the highest level in three years on Nov. 21, according to figures from the Federal Reserve.
Bloomberg Survey
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Trade Import Initial
Balance Prices Claims
$ Blns MOM% ,000’s
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Date of Release 12/11 12/11 12/11
Observation Period Oct. Nov. Dec. 6
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Median -53.5 -4.9% 525
Average -53.1 -4.8% 525
High Forecast -47.0 -0.8% 555
Low Forecast -57.5 -8.0% 445
Number of Participants 70 54 39
Previous -56.5 -4.7% 509
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4CAST Ltd. -49.0 -6.5% 535
Action Economics -49.0 -7.0% 520
AIG Investments -49.0 -2.7% 520
Aletti Gestielle SGR -53.2 --- 520
Ameriprise Financial Inc -54.0 -5.0% ---
Argus Research Corp. -54.5 -0.8% ---
Banc of America Securitie -47.0 --- ---
Bank of Tokyo- Mitsubishi -53.3 -4.6% 515
Bantleon Bank AG --- -5.0% ---
Barclays Capital -56.0 -6.0% 530
BMO Capital Markets -51.0 -5.0% 520
BNP Paribas -53.0 -6.0% 544
Briefing.com -53.5 --- ---
Calyon -54.0 --- ---
CIBC World Markets -52.0 -5.0% ---
Citi -56.0 -4.5% ---
ClearView Economics -53.5 --- ---
Commerzbank AG -50.0 --- 550
Credit Suisse -52.0 -4.0% 535
Daiwa Securities America -57.5 --- ---
Desjardins Group -50.0 -4.3% 520
Deutsche Bank Securities -56.0 -6.0% 525
Deutsche Postbank AG -54.0 -4.0% ---
DZ Bank -54.5 -4.0% ---
First Trust Advisors -53.8 -5.9% 523
Fortis -50.0 --- ---
FTN Financial -53.0 --- ---
Goldman, Sachs & Co. -55.5 --- ---
Helaba -54.0 -1.0% ---
Herrmann Forecasting -53.5 -4.9% 529
High Frequency Economics -52.0 -8.0% 540
Horizon Investments -50.0 --- ---
HSBC Markets -52.0 -4.5% 520
IDEAglobal -55.0 -3.0% 530
IHS Global Insight -51.0 --- ---
Informa Global Markets -55.0 -1.0% 525
ING Financial Markets -55.0 -7.5% 520
Insight Economics -52.5 -5.0% 540
Intesa-SanPaulo -54.0 -4.5% ---
J.P. Morgan Chase -52.4 -7.0% 525
Janney Montgomery Scott L -54.5 -5.6% ---
Landesbank Berlin -48.0 -4.0% 530
Lloyds TSB -53.5 -4.0% 515
Maria Fiorini Ramirez Inc --- -6.5% 515
Merrill Lynch -53.0 -6.4% 485
Mizuho Securities -53.0 -5.0% 550
Moody’s Economy.com -54.2 -4.7% ---
Morgan Keegan & Co. -51.6 -2.4% ---
Morgan Stanley & Co. -54.0 --- ---
National Bank Financial -52.0 --- ---
National City Corporation -51.4 -4.9% ---
Natixis -53.4 -4.8% ---
Newedge --- -3.0% ---
Nomura Securities Intl. -56.8 --- ---
PNC Bank -54.0 --- ---
RBS Greenwich Capital -54.5 --- 555
Ried, Thunberg & Co. -53.0 -6.5% 500
Schneider Foreign Exchang -52.6 -3.4% 525
Scotia Capital -53.0 -4.2% 540
Societe Generale -54.7 --- ---
Standard Chartered -54.0 -4.0% ---
Stone & McCarthy Research -54.3 -4.9% 445
TD Securities -54.0 --- 550
Thomson Financial/IFR -57.3 -4.0% 525
Tullett Prebon -53.5 -4.6% 530
UBS Securities LLC -52.5 -5.0% 535
Unicredit MIB -55.0 -5.0% 540
University of Maryland -53.5 -7.0% ---
Wachovia Corp. -52.2 -6.5% ---
Wells Fargo & Co. -53.0 -7.0% 520
WestLB AG -53.0 -4.0% ---
Westpac Banking Co. -53.5 -5.0% 520
Wrightson Associates -53.0 -6.5% 500
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To contact the reporter on this story: Bob Willis in Washington at bwillis@bloomberg.net
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