By Timothy R. Homan
March 13 (Bloomberg) -- U.S. imports and exports both slumped for a sixth straight month in January in what may be the biggest collapse of world trade since the 1930s, raising the threat of protectionist measures to shield domestic industries.
The U.S. trade deficit narrowed in January to $36 billion, the lowest level in six years, on tumbling American demand for everything from OPEC oil to Japanese automobiles, Commerce Department figures showed today in Washington. The Labor Department said prices of imported goods dropped for a seventh month in February, another byproduct of the global recession.
American exports have slumped at a 44 percent annual pace in the most recent six months of data, with imports shrinking 51 percent, probably the most since the Great Depression, according to Morgan Stanley analysts. The figures may add to pressure on the Obama administration to rework international agreements and include protections for U.S. workers and the environment.
“The global volume of trade has collapsed,” said Christopher Low, chief economist at FTN Financial in New York in an interview with Bloomberg Television. “When you add protectionism on top of that, that further reduces both the volume of trade and also efficiencies. It tends to hurt both sides.”
The U.S. trade deficit has narrowed as imports fall faster than exports. American consumers are reining in spending as the unemployment rate surges and household wealth evaporates at a record pace. Consumer confidence remained near a 28-year low in March, a private report showed today.
Consumer Sentiment
The Reuters/University of Michigan preliminary index of consumer sentiment was at 56.6 in March, compared with 56.3 in February. The gauge reached 55.3 in November, the lowest level since 1980.
The trade gap with China increased to $20.6 billion from $19.9 billion in the prior month as U.S. exports to the nation dropped faster than imports. China has used some of the dollars it gets from trade surpluses with the U.S. to buy American government debt, making it the largest owner of Treasuries.
Treasuries dropped today after Chinese Premier Wen Jiabao said he is “worried” about the country’s holdings of the securities and wants assurances that the investment is safe. Benchmark 10-year note yields rose to 2.89 percent at 10:51 a.m. in New York from 2.86 percent late yesterday.
Finance ministers and central bankers from the Group of 20 industrial and emerging nations meet today in the U.K., where they may reiterate a commitment to avoid protectionism. Still, a decision by Switzerland’s central bank yesterday to drive down the value of its currency drew reminders of the competitive devaluations of the 1930s that worsened the Great Depression.
Protectionist Concern
“It is troubling that a country with a current surplus larger than 10 percent of GDP feels compelled to depreciate its currency,” Marc Chandler, a currency strategist at Brown Brothers Harriman & Co. in New York, wrote in a note.
Excluding petroleum, the U.S. trade deficit was little changed at $21.3 billion in January, the Commerce Department said.
The trade gap was projected to narrow to $38 billion from December’s $39.9 billion, according to the median forecast in a Bloomberg News survey of 72 economists. Projections ranged from $31 billion to $44.5 billion.
The global economy is likely to shrink this year for the first time since World War II, and trade will decline by the most in 80 years, the World Bank said this week without providing a specific estimate.
GDP Impact
The narrower gap is not good news for the U.S. economy because it mainly reflected the drop in petroleum prices. The numbers used to calculate gross domestic product, which eliminate the influence of prices, showed the trade deficit widened to $44 billion, the most since October.
Imports slumped 6.7 percent to $160.9 billion, the fewest since March 2005, paced by a $4.3 billion plunge in purchases of crude oil. Demand for foreign automobiles fell by $3.3 billion.
The deficit with OPEC dropped to $3.9 billion, the smallest since November 2003, and the gap with Japan shrank to the lowest level since January 1998, as U.S. imports fell to an almost 16- year low.
An even bigger concern for the U.S. economy is the slump in foreign demand for American-made goods. Exports decreased 5.7 percent to $124.9 billion, the lowest level since September 2006, as sales of automobiles, semiconductors, telecommunications gear and drilling equipment dropped, today’s report showed.
Technology Workers
National Semiconductor Corp., the maker of chips for the five largest mobile-phone makers, said it plans to cut more than 1,700 jobs, or about 25 percent of its workforce.
“The worldwide recession has impacted National’s business as demand has fallen considerably,” Chief Executive Officer Brian Halla said in a March 11 statement. “The actions we announced today will help us remain competitive.”
Boeing Co., the world’s second-largest commercial jet-maker, said it delivered 19 aircraft to buyers abroad in January, down from 27 the previous month.
U.S. gross domestic product is forecast to contract again this quarter after shrinking at a 6.2 percent annual pace from October to December, the most since 1982. A collapse in U.S. exports led to a widening in the trade gap that subtracted a half percentage point from growth last quarter.
The trade gap with Canada, the U.S.’s biggest trading partner, narrowed to the lowest level since May 1999, and the deficit with Mexico was the smallest since January 2002. The shortfall with the European Union was cut in half from $7 billion in December to $3.5 billion the following month.
To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net
Posts
No comments:
Post a Comment