US trade deficit widens to 18-month high
Thursday, 15 July 2010
WASHINGTON, July 14 (AFP): The US trade deficit unexpectedly widened in May to the highest level in 18 months, the government said yesterday, sparking fears of slowing growth in the world's largest economy.
Analysts warned that more cash flowing out of the United States could trim growth estimates and-amid a widening trade gap with China-could fuel a currency spat with Beijing.
The US government has called on Beijing to allow the yuan to appreciate more rapidly after allegations it was kept low for trade advantage.
The overall US trade gap for goods and services rose nearly five per cent to 42.3 billion dollars from 40.3 billion dollars in April, the Commerce Department reported.
Imports climbed nearly three per cent to an 19-month high of 194.5 billion dollars in May, while exports rose 2.4 per cent to a 20-month high of 152.3 billion dollars.
The fresh data baffled economists, who had expected the May deficit to fall to 39.4 billion dollars.
They estimate the deficit would have slashed between one and two percentage points from economic growth in the April-June quarter.
"Our current forecast has real GDP (gross domestic product) rising 3.0 per cent at an annual rate last quarter, but the risks are tilted toward a smaller gain," said Aaron Smith, a senior economist for Moody's Economy.com.
He said the deficit could shave one percentage point from the second quarter economic growth.
Nigel Gault, chief US economist for IHS Global Insight, said the deficit suggested that second quarter growth was in the 3.0- 3.5 per cent region rather than the 3.8 per cent rate that his firm had previously expected.
"And we expect growth to slow to an average 2.5 per cent pace in the second half of the year," he said.
The US economy grew by 2.7 per cent in the first quarter of 2010 but analysts expect expansion to slow in the second half of the year amid high unemployment caused by the worst recession in decades, and Europe's fiscal troubles.
While the trade deficit could blunt US growth, it still offered hope for global economic recovery as US consumer spending reemerges as a key driver of world growth.
The import surge was fueled by rises in consumer goods, motor vehicles, parts and engines, as well as capital goods.
Exports rose on the back of capital goods such as machinery, aircraft and computer accessories.
Analysts warned that more cash flowing out of the United States could trim growth estimates and-amid a widening trade gap with China-could fuel a currency spat with Beijing.
The US government has called on Beijing to allow the yuan to appreciate more rapidly after allegations it was kept low for trade advantage.
The overall US trade gap for goods and services rose nearly five per cent to 42.3 billion dollars from 40.3 billion dollars in April, the Commerce Department reported.
Imports climbed nearly three per cent to an 19-month high of 194.5 billion dollars in May, while exports rose 2.4 per cent to a 20-month high of 152.3 billion dollars.
The fresh data baffled economists, who had expected the May deficit to fall to 39.4 billion dollars.
They estimate the deficit would have slashed between one and two percentage points from economic growth in the April-June quarter.
"Our current forecast has real GDP (gross domestic product) rising 3.0 per cent at an annual rate last quarter, but the risks are tilted toward a smaller gain," said Aaron Smith, a senior economist for Moody's Economy.com.
He said the deficit could shave one percentage point from the second quarter economic growth.
Nigel Gault, chief US economist for IHS Global Insight, said the deficit suggested that second quarter growth was in the 3.0- 3.5 per cent region rather than the 3.8 per cent rate that his firm had previously expected.
"And we expect growth to slow to an average 2.5 per cent pace in the second half of the year," he said.
The US economy grew by 2.7 per cent in the first quarter of 2010 but analysts expect expansion to slow in the second half of the year amid high unemployment caused by the worst recession in decades, and Europe's fiscal troubles.
While the trade deficit could blunt US growth, it still offered hope for global economic recovery as US consumer spending reemerges as a key driver of world growth.
The import surge was fueled by rises in consumer goods, motor vehicles, parts and engines, as well as capital goods.
Exports rose on the back of capital goods such as machinery, aircraft and computer accessories.