US May trade gap widens on oil, China imports
July 13th, 2007
The US trade deficit rose in May to 60 billion dollars as Americans imported more oil and other goods, especially from China and other Asian economies, the Commerce Department said Thursday.
Analysts, however, pointed to a continuing narrowing trend in the deficit that was expected to contribute to stronger economic growth in the second quarter.
The May headline trade figure was in line with economists’ census forecast. It marked a 2.3 percent increase from a shortfall of 58.7 billion dollars in April, revised slightly lower from an initial estimate of 58.5 billion.
But it was significantly smaller than the 65.7-billion-dollar deficit of May 2006.
“The trade volume balance is looking much better in the second quarter than in the first, and we now expect foreign trade to make a large 1.3 percentage point contribution to Q2 GDP (second-quarter gross domestic product) growth,” said Jim Dorsey of Global Insight.
“That’s better than we had anticipated, so overall real GDP growth now appears headed for 3.6 percent, rather than the 3.2 percent we had previously expected.”
Imports in May reached a record 192 billion dollars, while exports also set a record at 132 billion dollars, the Commerce Department said.
The trade in goods deficit stood at 69 billion dollars, while trade in services had a surplus of nine billion dollars.
The Commerce Department said imports rose 2.3 percent or 4.2 billion dollars. More than half of the dollar increase was in energy and metals products.
Petroleum imports rose 6.0 percent by volume and the average price per barrel of crude, at 59.36 dollars, was the highest since 62.40 dollars last September.
Exports in May were up 2.2 percent or 2.9 billion dollars, mostly from higher capital goods exports, including aircraft, electronics and machinery.
Because the higher trade gap was due in large part to higher oil prices, analysts said the figures suggest the trade picture may help US economic output.
Robert Brusca at FAO Economics said “exports are finally showing some thrust over three months and capital goods exports, the category of US traditional export strength, are strong.”
The politically sensitive trade gap with China climbed 3.3 percent to 20 billion dollars, according to data unadjusted for seasonal variations.
With the dollar’s exchange rate taken into account, however, the gap narrowed by 0.6 percent.
Imports from China climbed 4.6 percent to 25.3 billion dollars and exports rose 9.8 percent to 5.3 billion.
In the January-May period, the deficit with China has climbed 17.2 percent to 96.3 billion dollars; when dollar-adjusted, it fell 14.1 percent.
Democratic lawmakers are pressing Republican President George W. Bush to take steps to stem the rising tide of Chinese imports. They argue the Chinese government is keeping its yuan currency undervalued against the dollar, making Chinese imports unfairly cheaper and keeping US imports more expensive in China.
Democratic US Senator Sherrod Brown on Thursday accused the Bush administration of failing to stand up to China, “a nation that doesn’t play by the rules.
“China manipulates its currency, exploits workers and environmental standards, and exports contaminated food, medicine, and products. Enough is enough. Our trade policy with China has been a disaster for our nation, and everyone except this administration recognizes it,” he said.
Separately, the United States on Thursday requested a formal World Trade Organization hearing on Chinese industrial subsidies that US officials said violated global trading rules.
The US trade gap with Japan, by contrast, narrowed to a three-year low of 5.9 billion dollars.
With the other Asian “tiger” economies — Hong Kong, South Korea, Singapore and Taiwan — it soared 254 percent to 1.3 billion dollars.
The shortfall with Mexico also climbed, by 12.6 percent to 5.9 billion dollars.
But it fell with the European Union by 2.5 percent to 8.8 billion dollars, and with Canada by 11.5 percent to 5.2 billion.
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