Trade Deficit in U.S. Unexpectedly Narrows to 10-Month Low
The U.S. trade deficit unexpectedly narrowed in November to the lowest level in 10 months as faster growth overseas and a weaker dollar boosted demand for American made aircraft and industrial supplies like cotton. Photographer: Angela Greiling Keane/Bloomberg
Jan. 13 (Bloomberg) -- The number of first-time claims for unemployment insurance payments jumped in the first week of 2011 to 445,000, the highest level since October, while the producer price index increased 1.1 percent from November, Labor Department figures showed today in Washington. Separately, the U.S. trade deficit unexpectedly narrowed 0.3 percent in November to $38.3 billion, the lowest level in 10 months. Bloomberg's Michael McKee reports on U.S. economic data released today. (Source: Bloomberg)
The U.S. trade deficit unexpectedly narrowed in November to the lowest level in 10 months as faster growth overseas and a weaker dollar boosted demand for American- made aircraft and industrial supplies like cotton.
The gap shrank 0.3 percent to $38.3 billion, less than the $40.5 billion median estimate of economists surveyed by Bloomberg News, Commerce Department figures showed today in Washington. Exports climbed to the highest level in more than two years.
Companies like General Electric Co. and Boeing Co. are benefiting from growing demand abroad and a lower dollar that is making American goods more competitive, propelling a factory-led economic recovery. The gain in exports exceeded an increase in imports that mainly reflected a price-driven surge in purchases of crude oil.
“It’s three months in a row that exports are up,” said Brian Jones, an economist at Societe General in New York. “We’re going to get a massive lift to fourth-quarter growth from the external sector.”
Other reports today showed claims for jobless benefits surged last week and the cost of wholesale goods climbed more than forecast in December.
Applications for unemployment insurance payments rose by 35,000 to 445,000, according to Labor Department data released today, as more Americans than usual were let go following the holidays. The average number of applications over the past four weeks, a less-volatile gauge, increased to 416,500.
Higher Prices
The producer price index increased 1.1 percent from November, the most in 11 months, led by higher prices for commodities such as fuel and food, another Labor Department report showed.
Stock-index futures dropped following the figures on concern the jump in claims showed the improvement in the job market was stalling. The contract on the Standard & Poor’s 500 Index maturing in March fell 0.2 percent to 1,281.2 at 8:44 a.m. in New York. Treasury securities were little changed.
The trade gap was projected to widen from an initially reported $38.7 billion in October, according to the median forecast of 71 economists surveyed. Estimates ranged from deficits of $37.5 billion to $43.5 billion. The Commerce Department revised the October shortfall to $38.4 billion.
After eliminating the influence of prices, which are the numbers used to calculate gross domestic product, the trade deficit increased to $45.2 from $44.8 billion. The average so far for the fourth quarter is smaller than that for the previous three months, indicating trade will contribute to growth.
Two-Year High
Exports increased 0.8 percent to $159.6 billion, the most since August 2008. Demand for American goods from China reached a record, and purchases from Germany were the strongest in two years.
Since reaching a one-year high on June 7, the dollar has dropped 6.5 percent against a trade-weighted basket of currencies. The decrease makes American goods cheaper to buyers abroad and will keep spurring manufacturing, which expanded for a 17th consecutive month in November.
Growing overseas economies are contributing to demand for U.S. goods. China, set to become the world’s second-largest economy this year, had a 9.6 percent gain in third-quarter gross domestic product from a year earlier. India grew 8.9 percent and Brazil expanded 6.7 percent.
GE last month said sales may increase as much as 5 percent this year as its industrial divisions, which include the world’s largest manufacturers of power-generation equipment, jet engines and locomotives, return to growth.
Emerging Markets
In an annual outlook meeting with investors on Dec. 14, GE’s Chief Executive Officer Jeffrey Immelt said the pace of industrial expansion will increase further in 2012. He pointed to Brazil as an emerging market where GE is building investments to fuel sales growth.
Boeing, which sold more than three times as many commercial airplanes in 2010 as the year before, and larger rival Airbus SAS are boosting production this year to accommodate orders from airlines and lessors. Randy Tinseth, marketing chief at Boeing’s Commercial Airplanes unit, said in a Jan. 6 interview that the growth trend for orders will continue as passenger and cargo traffic rebounds and emerging economies expand.
President Barack Obama is seeking to double American exports over the next five years. The Commerce Department has asked industry groups to review its proposal to relax export controls for technology items with military uses, covering sales to 37 allies including Germany, Japan and Canada.
Oil Imports
Imports increased 0.6 percent to $198 billion. The value of crude oil purchases increased to $19.8 billion from $18.9 billion in October. The price per barrel of imported crude reached the highest level since May.
The trade gap with China was little changed at $25.6 billion, as U.S. demand for their goods also climbed. Growing American demand for computers made in China helped widen the U.S. deficit in advanced technological products to the highest level on record.
Obama is due to meet with Chinese President Hu Jintao in Washington on Jan. 19 as currency policy remains a point of contention between the two governments.
U.S. Treasury Secretary Timothy F. Geithner yesterday said China needs to strengthen the “substantially undervalued” yuan because it puts other countries at a competitive disadvantage. “China’s exchange rate needs to strengthen in response to market forces,” Geithner said in a speech in Washington, adding that Beijing’s policies “have the effect of keeping the Chinese currency substantially undervalued.”
A narrowing of the gap in trade of pharmaceutical products also helped close the U.S. deficit in November. Drug imports dropped by $912 million, while exports climbed by $981 billion.
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