Tuesday, 05 May, 2015

Trade Deficit in U.S. Swells to Six-Year High as Imports Surg

(Bloomberg) — The U.S. trade deficit widened in March to the highest level in more than six years, fueled by a record surge in imports as commercial activity resumed at West Coast ports following a resolution to labor disputes. The gap increased 43.1 percent, the biggest jump in 18 years, to $51.4 billion, the largest since October 2008, the Commerce Department reported Tuesday in Washington. The shortfall exceeded the highest estimate of 70 economists surveyed by Bloomberg. Purchases of foreign-produced foods, capital goods and consumer products all set records, while demand for petroleum dropped. Container ships streamed into West Coast harbors in March after port operators and dockworkers negotiated a new contract, allowing the flow of imported and exported goods to resume. At the same time, steady employment gains, a nascent pickup in wage growth and a stronger dollar may also help fuel domestic demand for foreign goods, which will keep the deficit wide. “The big wrinkle in the trade data is the port showdown — all these ships that were at anchor outside the docks on the West Coast got offloaded in March,” Stuart Hoffman, chief economist at PNC Financial Services Group Inc. in Pittsburgh, Pennsylvania, said before the report. “The drag from trade should be persisting, but to a lesser degree.” The median forecast of economists surveyed by Bloomberg projected a widening to $41.7 billion. Estimates ranged from deficits of $36.5 billion to $46.5 billion. The Commerce Department revised the shortfall for February to $35.9 billion from an initially reported $35.4 billion. Imports Jump Imports increased 7.7 percent to $239.2 billion, the most this year, from $222.1 billion in February. Capital goods such as industrial machines and computers, automobiles and parts and consumer products, including cellular telephones, clothing and furniture, flooded in as the backlog at West Coast ports subsided. Crude oil was less in demand as the U.S. continued its trajectory toward energy independence. The value of petroleum imports was the lowest since September 2004, making the fuel’s trade gap the smallest in almost 13 years. Excluding petroleum, imports were a record. While exports also rose, the increase was swamped by the surge in imports, a sign that global demand remains weak. Sales of American-made products to customers overseas climbed 0.9 percent to $187.8 billion from $186.2 billion in February. After eliminating the effects of price fluctuations, which generates the numbers used to calculate gross domestic product, the trade deficit widened to $67.2 billion in March, the largest in eight years. Probably Shrank The bigger-than-projected jump in the deficit probably means the U.S. economy contracted in the first quarter when the Commerce Department issues revisions later this month. The latest data showed the world’s largest economy grew at a 0.2 percent annualized pace in the first quarter after advancing at a 2.2 percent rate in the previous three months. A widening trade gap subtracted 1.25 percentage points from growth. The government will incorporate Tuesday’s data into the revised figures on gross domestic product. Foreign exchange fluctuations are probably affecting U.S. companies’ abilities to stay competitive in a global market as a stronger dollar makes imported goods cheaper and domestically made goods more expensive for trade partners to buy. Even after losses in April, the dollar is still the best-performing major developed currency over the past year, gaining 17.5 percent, according to Bloomberg Correlation-Weighted Indexes. The euro dropped 8 percent, while the Japanese yen fell 2.1 percent, according to the indexes. Import Demand At the same time, U.S. consumers with more jobs and higher pay at their backs may be ramping up demand for foreign-made goods, further exacerbating the trade gap. “The first-quarter weakness is temporary, but the part that’s not is the drag from trade, though it shouldn’t be anywhere near as severe as it was during the first quarter,” Hoffman said. “The stronger dollar still means that any kind of growth we get in the U.S. economy is going to be made in America.” Disclaimer The information contained in this communication from the sender is confidential. It is intended solely for use by the recipient and others authorized to receive it. If you are not the recipient, you are hereby notified that any disclosure, copying, distribution or taking action in relation of the contents of this information is strictly prohibited and may be unlawful. This email has been scanned for viruses and malware, and may have been automatically archived by Mimecast Ltd, an innovator in Software as a Service (SaaS) for business. Providing a safer and more useful place for your human generated data. Specializing in; Security, archiving and compliance. To find out more visit the Mimecast website.