Tags: Trade | Gap | US | Climbs | More | Than | Forecast

Trade Deficit Widens Sharply to $46.3 Billion

Thursday, 14 Oct 2010 08:35 AM

The trade deficit widened more than forecast in August as growing U.S. demand for foreign autos and capital equipment swamped gains in exports.

The gap grew 8.8 percent to $46.3 billion, exceeding the $44 billion median forecast of economists surveyed by Bloomberg News, Commerce Department figures showed today in Washington. Imports rose 2.1 percent, while exports increased 0.2 percent.

The gain in purchases of goods made overseas is a positive signal that American companies are continuing to invest in new equipment and rebuilding inventories. Foreign sales of U.S. goods rose to the highest level in two years, one reason why manufacturers like Intel Corp. remain a bright spot in the economic recovery.

“When U.S. domestic demand is growing at a reasonable pace, that means import gains tend to more than offset export growth,” Dean Maki, chief U.S. economist at Barclays Capital Inc. in New York, said before the report. “The trade deficit will remain on a gradual widening trend.”

Estimates of the 75 economists surveyed ranged from $40 billion to $47.5 billion.

The August balance adjusted for inflation, which is the figure used to calculate GDP, increased to $51.2 billion from $47.3 billion. The gap compares with the average $47.9 billion a month in the second quarter, indication trade may have slowed growth last quarter.

Trade’s Influence

Trade subtracted 3.5 percentage points from growth in April through June, the most since 1947, as imports surged at the fastest pace since 1984. Foreign purchases detract from growth because they signal demand is being filled by producers overseas instead of American firms.

The drag from trade may be somewhat offset by bigger gains in business investment in new equipment and inventories as the figures showed American companies bought more semiconductors, generators and toys abroad. The value of imports rose to $200.2 billion, just short of an almost two-year high reached in June.

U.S. exports increased to $153.9 billion, the highest level in two years. The gain reflected increasing foreign demand for food and industrial suppliers. Sales of American-made semiconductors rose by $165 million for the month.

Intel, the world’s biggest chipmaker, is among U.S. exporters profiting from growth in China. The Santa Clara, California-based company this week predicted fourth-quarter sales that beat analysts’ estimates as demand in emerging economies helped weather slowing purchase among consumers in the U.S. and Europe, Intel Chief Financial Officer Stacy Smith said in an interview.

Emerging Markets

“We saw demand strength in emerging markets and the enterprise segment of the market,” Smith said. “It was offset by consumer demand in developed markets being a little less than we thought when we started the quarter.”

A $1.7 billion slump in demand for U.S. commercial aircraft, which is often volatile, restrained exports. Boeing Co., the largest U.S. civilian aircraft maker, shipped 17 planes overseas in August, down from 26 in July, according to company data.

The outlook for U.S. exports is holding up as emerging economies from China to India and Brazil modernize their infrastructure and more affluent households can afford to buy goods and services from abroad.

A drop in the value of the dollar, by making U.S. goods cheaper to foreign buyers, may keep boosting exports. The U.S. dollar has weakened 7.2 percent against a trade-weighted basket of currencies since reaching a one-year high on June 7.

China, Brazil

The deficit with China reached a record level for the month as imports climbed.

Growing friction over exchange-rate and trade policy dominated discussions at the IMF’s annual meeting in Washington this month.

Treasury Secretary Timothy F. Geithner and European Central Bank President Jean-Claude Trichet were among those to signal irritation that China is restraining its currency, the yuan, to aid exports even as its economy outpaces that of other members of the Group of 20. Leaders of emerging economies blamed a flood of capital that is pushing up their currencies on too-low U.S. interest rates.

U.S. impatience with China boiled over on Sept. 29 when the House of Representatives passed a measure that would let American companies seek import duties to prevent Chinese manufacturers from using an artificially weak yuan as a competitive tool. The measure won’t go to the Senate until after U.S. congressional elections in November.

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The trade deficit widened more than forecast in August as growing U.S. demand for foreign autos and capital equipment swamped gains in exports.The gap grew 8.8 percent to $46.3 billion, exceeding the $44 billion median forecast of economists surveyed by Bloomberg News,...
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Thursday, 14 Oct 2010 08:35 AM
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