U.S. April Trade Gap Widens to $57 Bln; Imports Rise (Update1)
U.S. April Trade Gap Widens to $57 Bln; Imports Rise
June 10 (Bloomberg) -- The U.S. trade deficit widened to $57 billion in April as Americans paid record prices for oil and bought more goods from China, a government report showed.
The trade gap in goods and services followed a $53.6 billion deficit in March that was narrower than the government first reported, the Commerce Department today said in Washington. Imports rose 4.1 percent, the biggest increase since November 2002, to a record $163.4 billion. Exports also were a record.
April's deficit was $1 billion less than the median forecast, and the dollar gained against the euro and yen. While trade deficits subtract from calculations of economic growth, economists said rising imports also are a sign of healthy demand. The U.S. economy is on a ``relatively firm footing,'' Federal Reserve Chairman Alan Greenspan told Congress yesterday.
``The growth outlook is much more favorable,'' said Anthony Chan, a senior economist at JPMorgan Asset Management in Columbus, Ohio, who accurately forecast the wider gap. ``This report supports Greenspan's rosy economic view that the economy is likely to continue to grow unabated this quarter thereby justifying continued increases in short-term rates.''
Economists expected the deficit to widen to $58 billion for the month compared with a previously reported $55 billion gap in March, according to the median estimate of 68 economists' forecasts in a Bloomberg News survey. All expected the deficit to widen, with forecasts ranging from $55.2 billion to $61 billion.
Exports rose 2.9 percent to a record $106.4 billion.
GDP Effect
The figure showing that March's deficit was narrower than first reported suggests first-quarter economic growth will be revised higher. Adjusted for inflation, April's trade gap of $56.1 billion was lower than $59.1 billion for the first quarter. A narrower gap would contribute to growth this quarter as well.
The deficit reached $228.7 billion in the year's first four months compared with $187.3 billion in the year-earlier period. Last year, the gap reached a record $617.6 billion.
Against the euro, the dollar advanced to $1.2184 at 8:47 a.m. in New York, from $1.2230 late yesterday, according to currency- dealing system EBS. The dollar rose to 107.82 yen from 107.43.
April's record imports reflected the highest prices ever for petroleum and a jump in purchases of Chinese textiles.
The value of U.S. oil imports rose in April to $14 billion from $13.4 billion the previous month. The price of oil was $44.76 a barrel, the most ever in the report, compared with $41.14 in March. The nation imported 313.8 million barrels for the month compared with 326 million barrels.
Import Prices
Oil may not contribute to the trade deficit in May. A Labor Department report today showed prices of imported goods fell 1.3 percent that month, more than forecast and the first decline this year, reflecting lower costs of petroleum, autos and building materials.
April's trade gap with China widened to $14.7 billion from $12.9 billion a month earlier, reflecting an 11 percent increase in textile imports. Textile imports rose 52 percent so far this year from the same four months of 2004, the report showed.
Americans spent 5.5 percent more on foreign-made consumer goods and 7.6 percent more on capital goods. Imports of autos and parts rose 1.2 percent in April.
Toyota Motor Corp. and Nissan Motor Co., Asia's two biggest automakers, said last month U.S. sales of cars and trucks increased more than 25 percent in April compared with the same month last year.
Geneva-based Cie. Financiere Richemont AG, the owner of luxury-goods brands including Cartier and Mont Blanc, said yesterday that annual profit rose by a third as demand for watches and jewelry surged in the U.S. and Asia.
``Across the board our watch sales are cracking ahead,'' Executive Chairman Johann Rupert said yesterday in an interview. ``We are very optimistic about what we see in the market.''
Exports
The rise in exports reflected increases in business equipment and industrial supplies. Foreign businesses also spent 5.5 percent more on capital goods, led by purchases of commercial aircraft. Industrial supplies rose 5 percent, led by sales of fuel oil and plastics. Exports of consumer goods fell 1.4 percent.
A drop in the value of the dollar may also be contributing to the gains in exports. A cheaper dollar makes U.S.-made goods less expensive to foreign buyers. The dollar is down 9 percent against a trade-weighted basket of currencies from the nation's biggest trading partners since reaching a high in February 2002, according to Federal Reserve figures.
Boeing Co., the world's No. 2 commercial-jet maker, said this month it delivered 16 aircraft to foreign buyers in April compared with 12 a month earlier. Chicago-based Boeing this week raised its 20-year forecast for worldwide jetliner deliveries from all manufacturers by 2.8 percent because of rising demand from low- cost carriers in Asia.
China
Still, because the U.S. imports about 50 percent more goods and services than it exports, exports have to grow about twice as fast just to stabilize the trade deficit, economists said.
The wider deficit with China followed an unexpected narrowing in March that may have reflected slowdowns related to holiday- related for the Lunar New Year, economists said. The deficit might widen again in May, after China today said its exports for that month grew 30 percent from year, faster than its imports for a seventh month. China said its overall trade surplus rose to $8.99 billion from $4.59 billion in April.
China will introduce measures to spur consumer spending that will help reduce an imbalance that's fueling tensions with the U.S. and Europe, People's Bank of China Governor Zhou Xiaochuan said this week.
Changes in China
``We haven't seen much increase in consumption, but rather we saw rapid growth in exports,'' he said at a conference in Beijing on June 7. ``This isn't something we want to see. Our policies are to cut the trade surplus to zero if possible. We want to use new policies to increase consumption.''
Some of those efforts may have already paid. U.S. exports to China were a record $3.4 billion, today's report showed.
President George W. Bush's administration is under pressure to prod the Chinese to revalue their currency, the yuan, which has been pegged to the dollar for the last decade. U.S. senators last month criticized Treasury Secretary John Snow for failing to brand China a currency manipulator in a department finding.
U.S. manufacturers and lawmakers say China's fixed exchange rate has contributed to a record trade deficit and the loss of 1.1 million American jobs over the past three years. A stronger yuan would make Chinese goods more expensive, allowing goods from other countries to compete for sales, economists said.
Yuan
In Asia, more flexible ``exchange rate will avoid dislocations,'' Snow said in an interview yesterday. ``For their own sake and the sake of global economy, we're urging them to move to greater flexibility.''
A strengthening of the Chinese currency alone won't be enough to narrow the total U.S. trade deficit, Fed Chairman Greenspan said this week during a speech via satellite to a monetary conference in Beijing.
While ``there's no question'' that a stronger yuan would cause the U.S. to import fewer goods from China, ``that does not mean that our current-account deficit or our trade deficit will shrink very much, if at all,'' Greenspan said. U.S. businesses would just import more from other low-cost countries, he said.
Regions
By region, the department reported the trade deficit with Japan narrowed to $7.2 billion from $7.8 billion. The deficit with the Organization of Petroleum Exporting Countries widened to $7.1 billion from $6.6 billion.
The deficit with Canada, the largest U.S. trading partner, widened to $9.8 billion from $9.3 billion. The gap with Mexico widened to $4.4 billion from $4.3 billion. The deficit with Europe increased to $11.8 billion from $10.9 billion.
The U.S. economy is likely to grow at a 3.3 percent annual pace this quarter and expand 3.5 percent this year, according to the median estimate of economists surveyed by Bloomberg News from May 31 to June 8.
Growth in the countries that use the euro as a common currency is projected at 1.4 percent this year, while Japan will probably expand 1.2 percent, according to the median forecast this month of economists surveyed by Blue Chip Economic Indicators.
To contact the reporters on this story: Carlos Torres in Washington ctorres2@bloomberg.net or Joe Richter in Washington 1872 or jrichter@bloomberg.net
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