U.S. Trade Gap Falls More Than Forecast to Three-Month Low $44.8 Billion

By Alex Kowalski - Sep 8, 2011 7:48 PM GMT+0700
The U.S. trade deficit narrowed more than forecast in July, reaching a three-month low as exports climbed to a record and crude oil imports eased.
The gap shrank 13.1 percent, the most since February 2009, to $44.8 billion from a revised $51.6 billion shortfall in June, Commerce Department figures showed today in Washington. The deficit was less than all projections in a Bloomberg News survey. Exports rose 3.6 percent as companies shipped more capital goods and automobiles to overseas customers.
The global slowdown and Europe’s debt crisis have raised concerns of a diminishing international flow of goods and services the rest of this year. Sustained growth in exports may help U.S. manufacturers weather weaker demand from American consumers and businesses that’s restraining the recovery.
“Trade could add favorably to economic activity during the third quarter,” said Millan Mulraine, senior U.S. strategist at TD Securities in New York. “The slowdown in the global economy may not be as great as we thought a few months ago, which certainly is encouraging.”
First-time applications for unemployment benefits rose last week, a sign the labor market is struggling to gain traction. Jobless claims climbed by 2,000 to 414,000 in the week ended Sept. 3, Labor Department figures showed today in Washington.
Stock-index futures held losses after the reports. The contract on the Standard & Poor’s 500 Index expiring this month fell 1.1 percent to 1,186.3 at 8:48 a.m. in New York. The yield on the benchmark 10-year Treasury note fell to 1.99 percent from 2.04 percent late yesterday.

Economists’ Estimates

The trade gap was projected to shrink from an initially reported $53.1 billion in June, according to the median forecast of 74 economists surveyed by Bloomberg. Estimates ranged from deficits of $55 billion to $46 billion.
After eliminating the influence of prices to render the figures used in calculating gross domestic product, the trade deficit narrowed to a three-month low of $45.3 billion from $50.3 billion. The number was less than the $47.3 billion deficit averaged in the second quarter, indicating trade may add to growth this quarter.
Exports increased to $178 billion, boosted by sales of telecommunications equipment, civilian aircraft, autos and industrial engines. U.S. shipments of capital goods and autos and parts to overseas customers were the highest on record.
Imports fell 0.2 percent to $222.8 billion from $223.4 billion in the prior month.

Petroleum Imports

The figures showed a reduction in demand for crude oil as the price per barrel exceeded $100 in July for a fourth month. The average price of imported crude oil was $104.27 compared with $106 in June, today’s report showed. U.S. companies imported 350,657 barrels in July, the fewest since April.
Imports in July reflected $22.3 billion in shipments of auto parts, the most since February 2008. Parts deliveries from Japan have started to recover after the nation’s March earthquake and tsunami. Automobile-related goods have been entering the U.S. at about 50 percent of the rate before the natural disaster, according to Richard Steinke, executive director of the Port of Long Beach.
A labor market that stagnated in August is weighing on the ability of U.S. households to spend on goods made overseas. Payrolls were unchanged last month, and the unemployment rate held at 9.1 percent, Labor Department figures showed Sept. 2.
“While the economies in our primary markets have generally improved since the lows of the economic crisis, many consumers remain cautious,” Denise Morrison, president and chief executive officer at Campbell Soup Co. (CPB), said on a Sept. 2 conference call with analysts. “The recovery has not progressed at the pace or intensity consumers had hoped for. As a result, consumers remain careful about their purchases and feel the need for resourcefulness and vigilance.”

Campbell Profit

Campbell, the world’s biggest soup maker, said fourth- quarter profit declined 12 percent as sales dropped.
Slower growth in developed countries raises the risk manufacturers will temper production going forward. Gross domestic product in the 17-nation euro area rose 0.2 percent in three months ended June from the first quarter, when it increased 0.8 percent. Economic growth in Canada, the U.S.’s largest trading partner, shrank in the second quarter for the first time since the recession two years ago.
The trade gap with China widened to $27 billion, the highest since September, from $26.7 billion as gain in imports outpaced an increase in exports. The deficit with Canada increased to $3.2 billion from $2.8 billion, while it shrank with the European Union. Exports to South and Central America were the highest ever.
To contact the reporter on this story: Alex Kowalski in Washington at akowalski13@bloomberg.net
To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net