United States trade deficit de­clines sharply in April


The U.S. trade deficit dropped sharply in April as ex­ports posted a mod­est gain and im­ports fell, rais­ing hopes that trade’s drag on eco­nomic growth will ease in the cur­rent quar­ter.

The April deficit tum­bled 19.2 per­cent to US$40.9 bil­lion af­ter surg­ing to US$50.6 bil­lion in March, the Com­merce Depart­ment said Wed­nes­day. The March deficit had been the high­est level since late 2008.

The big surge in the deficit re­duced over­all eco­nomic growth by nearly 2 per­cent­age points in the first quar­ter, send­ing gross do­mes­tic prod­uct into neg­a­tive ter­ri­tory.

In April, ex­ports edged up 1 per­cent to US$189.9 bil­lion, led by a big rise in com­mer­cial air­plane sales. Im­ports fell 3.3 per­cent to US$230.8 bil­lion. The deficit is the dif­fer­ence be­tween im­ports and ex­ports.

The big deficit in­crease in March re­flected the end of a la­bor dis­pute which had tied up West Coast ports. With the ports fully op­er­a­tional, a back­log of im­ports, many from China, flooded into the coun­try. Econ­o­mists had pre­dicted with the back­log pro- cessed, the deficit would shrink in April to more nor­mal lev­els.

For the first four months of the year, the deficit is run­ning 1 per­cent higher than the same pe­riod a year ago. Econ­o­mists be­lieve this year’s deficit will in­crease modestly from the re­vised US$508.3 bil­lion deficit in 2014.

Robert Kav­cic, se­nior econ­o­mist at BMO Cap­i­tal Mar­kets, said he be­lieved trade’s im­pact would be roughly neu­tral in the cur­rent April-June pe­riod and would likely trim growth by about a half per­cent­age point for the en­tire year.

Amer­i­can man­u­fac­tur­ers have been hurt by a rise in the value of the dollar over the past year. The stronger dollar makes Amer­i­can goods more ex­pen­sive on over­seas mar­kets and makes im­ports cheaper for U.S. con­sumers. But a boom in U.S. en­ergy pro­duc­tion has helped to lower the trade deficit, re­duc­ing Amer­i­cans’ re­liance on for­eign oil. In April, the petroleum deficit shrank to US$6.8 bil­lion, the low­est level in 13 years.

The rise in ex­ports re­flected not only the in­crease in oil ship­ments but also gains in sales of Amer­i­can- made air­planes, telecom­mu­ni­ca­tions equip­ment, au­tos and heavy ma­chin­ery. The fall in im­ports re­flected de­clines in im­ports of au­tos, industrial ma­chin­ery and con­sumer goods in­clud­ing cell­phones and cloth­ing.

The deficit with China, which had surged in March, dropped 15.2 per­cent to US$26.5 bil­lion in April. But for the year, the deficit with China is run­ning 12.7 per­cent above the same level in 2014, the lat­est year in which the U.S.-China trade gap set an­other record.

On top of the trade deficit, the econ­omy ran in to other head­winds in the first quar­ter, in­clud­ing a se­vere win­ter which slowed eco­nomic ac­tiv­ity. There was also a sharp cut­back in cap­i­tal ex­pen­di­tures by U.S. en­ergy com­pa­nies as the price of oil plunged.

But econ­o­mists are look­ing for growth to re­cover in the cur­rent quar­ter, ex­pect­ing the over­all econ­omy, as mea­sured by the gross do­mes­tic prod­uct, to ex­pand at a rate of around 2.5 per­cent, helped by healthy job gains. New jobs should boost spend­ing by Amer­i­cans while some of the ad­verse ef­fects that held back growth at the be­gin­ning of the year fade in the April-June pe­riod.

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