Bloomberg News
The trade deficit in the U.S. widened in September as exports cooled from a record, highlighting how weakening global growth will affect the world's largest economy.
The gap grew by 7.6 percent to $43 billion, the largest since May, from $40 billion in August, Commerce Department figures showed today in Washington. The median forecast in a Bloomberg survey of 68 economists called for a deficit of $40.2 billion. Exports decreased by the most since February, reflecting slowing demand from Europe, Latin America and Japan.
This is the first sign that American companies' international sales will suffer as economies from Europe to emerging markets struggle, indicating trade will provide less support to the expansion. In addition, cheaper oil and gains in crude production cut the value of U.S. purchases of foreign petroleum to a five-year low, offsetting record imports of consumer goods such as Apple Inc.'s latest iPhone.
'You can't expect with the global economy being as weak as it is that U.S. exports would continue to grow in double digits,' said Stuart Hoffman, chief economist at PNC Financial Services Group Inc. in Pittsburgh, who projected a widening gap and is among the most accurate trade forecasters over the past two years, according to data compiled by Bloomberg. 'Given the global environment and the U.S. being far out ahead, you can expect the trade deficit will widen and not be much of a positive for growth in the fourth quarter.'
Shares Fall
Stock-index futures dropped, with equity benchmarks near records, as investors weighed prospects for economic growth and corporate earnings to help gauge the pace of the recovery. The contract on the Standard & Poor's 500 Index maturing in December fell 0.2 percent to 2,006.6 at 9:03 a.m. in New York.
Bloomberg survey estimates ranged from a trade deficit of $38.1 billion to $42.5 billion. The Commerce Department initially reported a $40.1 billion shortfall for August.
For September, exports decreased 1.5 percent to $195.6 billion, the least since April, from a record $198.6 billion the prior month, today's data showed. The decrease was widespread, including industrial supplies, capital equipment, cars and consumer goods. Only sales of foods saw a jump, paced by a surge in demand for soybeans.
Imports totaled $238.6 billion, the same as in August. Purchases of foreign-made mobile phones climbed by $1.92 billion, making up for a drop in demand for capital equipment, autos and fuel.
iPhone Shipments
Cupertino, California-based Apple is among companies contributing to higher shipments of electronics products from abroad. The company in September introduced the larger-screened iPhone 6 and 6 Plus, a smartwatch and a mobile-payments system. It also unveiled new iPads and Macintosh computers in October to lure buyers during the holiday-shopping season.
Today's report showed the trade gap with China, where some of Apple's products are assembled, climbed to a record $35.6 billion, reflecting a 12.7 percent jump in imports from the Asian nation.
Sliding oil costs will probably help to depress the import bill, countering increases in spending by American consumer and companies. Brent crude futures closed at $84.78 a barrel yesterday in London, down about $30 from this year's high of $115.06 reached on June 19.
Excluding petroleum, the trade shortfall climbed to $29 billion from $26.9 billion in August.
Inflation Adjusted
After eliminating the influence of prices, which renders the numbers used to calculate gross domestic product, the trade deficit widened to $50.8 billion from $48.2 billion.
Figures released last week showed that a narrowing trade deficit contributed to economic growth in the third quarter. Gross domestic product grew at a 3.5 percent annualized rate, with net exports accounting for 1.3 percentage points of the advance. The widening at the end of the quarter may cause that figure to be reduced.
The widening trade gap is not 'an omen of slower growth, just a shift in the composition toward more domestic demand' and away from exports, said PNC's Hoffman. 'Don't forget, consumer spending will be stronger because of the drop in oil prices' and gains in payrolls, he said.
Exports may come under pressure as world growth cools and the dollar strengthens. The currency climbed almost 5 percent from the end of June through October against a basket of currencies from the nation's trading partners.
Global Growth
China’s economy expanded 7.3 percent in the third quarter from a year earlier, the weakest pace since early 2009. In Japan, the world's third-biggest economy, the central bank last week voted to expand what was already an unprecedentedly large monetary-stimulus program to try to spur growth and ward off the threat of deflation.
The global economy is still 'struggling to regain cruising speed,' while geopolitical problems in Ukraine and the Middle East compound the difficulties, International Monetary Fund Managing Director Christine Lagarde said last week at an event in Washington.
The U.S., though, is equipped to withstand the global turmoil, economists project. The combination of more jobs, falling gasoline prices and low borrowing costs will help lift household purchases, which account for almost 70 percent of the economy.
Caterpillar Inc., the largest construction-equipment maker, topped analysts' profit estimates for the third quarter and raised its full-year forecast. The company cited higher North America sales of construction machinery, and oil and gas industry equipment, while also expressing concerns about the global economy including political conflict and social unrest.
'We're hopeful that economic growth will improve in 2015 but are mindful of the uncertainties and risks,' Chief Executive Officer Doug Oberhelman said in an Oct. 23 earnings statement.
To contact the reporters on this story: Shobhana Chandra in Washington at schandra1@bloomberg.net; Vince Golle in Washington at vgolle@bloomberg.net
To contact the editor responsible for this story: Carlos Torres at ctorres2@bloomberg.net
Posted by Unknown on Tuesday, November 4, 2014 - Rating: 4.5
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