In one of the first signs that a global slowdown will limit how fast the world’s largest economy will grow, the trade deficit in the U.S. widened in September as exports slumped from a record.
The gap grew by 7.6 percent to $43 billion, the biggest since May, from $40 billion in August, Commerce Department figures showed today in Washington. The decrease in international sales was broad-based, with customers in Europe, Latin America and Japan all pulling back.
Cooling foreign markets combined with an increase in the value of the dollar will probably keep hindering sales, turning trade into a headwind for the U.S. economy. Bigger gains in American consumer spending as fuel prices drop and employment climbs will provide the ballast needed to prevent the expansion from succumbing to the slowdown elsewhere.
“Given the global environment and the U.S. being far out ahead, you can expect the trade deficit will widen and not be much of a positive for growth in the fourth quarter,” said Stuart Hoffman, chief economist at PNC Financial Services Group Inc. in Pittsburgh, who is among the most accurate trade forecasters over the past two years, according to data compiled by Bloomberg. It isn’t “an omen of slower growth, just a shift in the composition toward more domestic demand” and away from exports, he said.
Photographer: Mark Elias/Bloomberg
The Dante B. Fascell Port of Miami-Dade County in Miami. Close
The Dante B. Fascell Port of Miami-Dade County in Miami.
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Photographer: Mark Elias/Bloomberg
The Dante B. Fascell Port of Miami-Dade County in Miami.
“Don’t forget, consumer spending will be stronger because of the drop in oil prices” and gains in payrolls, Hoffman said.
Shares Fall
Most stocks dropped, pulling the Standard Poor’s 500 Index down from near a record, as energy companies slumped after oil reached a three-year low and forecasts from Sprint Corp. to Priceline Group Inc. disappointed investors. The SP 500 fell 0.3 percent to 2,012.1 at the close in New York.
The median forecast in a Bloomberg survey of 68 economists called for the trade deficit to be little changed at $40.2 billion compared with the initially reported $40.1 billion shortfall for August. Estimates ranged from gaps of 38.1 billion to $42.5 billion.
For September, exports decreased 1.5 percent to $195.6 billion, the least since April, from a record $198.6 billion the prior month, today’s data showed. The decline was widespread, including industrial supplies such as fuel, business equipment, cars and parts and consumer goods.
While the drop in exports is probably more tied to cooling world growth, a strengthening dollar will further pressure overseas sales. The currency climbed almost 5 percent from the end of June through October against a basket of currencies from the nation’s trading partners, which makes American goods and services more expensive to foreign customers.
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Global Growth
“Sluggish growth is more of a problem — it means there’s less demand,” said Ward McCarthy, chief financial economist at Jefferies LLC in New York. “A stronger dollar over a period of time is probably going to take a little bit of a bite out of exports, but it hasn’t been going on long enough that it would have really had a significant impact on the September numbers.”
Imports totaled $238.6 billion, the same as in August. Purchases of foreign-made mobile phones surged by $1.92 billion, making up for a drop in demand for commercial aircraft, machinery, autos and parts and fuel.
Cupertino, California-based Apple Inc. is among companies contributing to higher shipments of electronics products from abroad. The company in September introduced the larger-screened iPhone 6 and 6 Plus, a smartwatch and a mobile-payments system. It also unveiled new iPads and Macintosh computers in October to lure buyers during the holiday-shopping season.
China Imports
Today’s report showed the trade gap with China, where some of Apple’s products are assembled, climbed to a record $35.6 billion, reflecting a 12.7 percent jump in imports from the Asian nation.
Sliding oil costs will probably help to restrain the import bill even as American consumer and business spending climb. Brent crude futures for December settlement declined as much as 3.2 percent to $82.08 a barrel on the London-based ICE Futures Europe exchange, a four-year low, as the Saudi Arabian Oil Co. reduced the cost of its fuel to the U.S.
After eliminating the influence of prices, which renders the numbers used to calculate gross domestic product, the trade deficit widened to $50.8 billion from $48.2 billion.
The outcome was larger than the Commerce Department estimated last week when it reported GDP grew at a 3.5 percent annualized rate with net exports accounting for 1.3 percentage points of the advance. Economists at Barclays Plc and Macroeconomic Advisers were among those estimating the larger gap will reduce last quarter’s reading by 0.4 percentage point, taking it closer to 3 percent.
Slowing Economies
China’s economy expanded 7.3 percent in the third quarter from a year earlier, the weakest pace since early 2009. In Japan, the world’s third-biggest economy, the central bank last week voted to expand what was already an unprecedentedly large monetary-stimulus program to try to spur growth and ward off the threat of deflation.
The global economy is still “struggling to regain cruising speed,” while geopolitical problems in Ukraine and the Middle East compound the difficulties, International Monetary Fund Managing Director Christine Lagarde said last week at an event in Washington.
Withstanding Slowdown
The U.S., though, is equipped to withstand the global turmoil, economists project. The combination of more jobs, falling gasoline prices and low borrowing costs will help lift household purchases, which account for almost 70 percent of the economy.
Caterpillar Inc., the largest construction-equipment maker, topped analysts’ profit estimates for the third quarter and raised its full-year forecast. The company cited higher North America sales of construction machinery and oil and gas industry equipment, while also expressing concerns about the global economy including political conflict and social unrest.
“We’re hopeful that economic growth will improve in 2015 but are mindful of the uncertainties and risks,” Chief Executive Officer Doug Oberhelman said in an Oct. 23 earnings statement.
To contact the reporters on this story: Shobhana Chandra in Washington at schandra1@bloomberg.net; Vince Golle in Washington at vgolle@bloomberg.net
To contact the editor responsible for this story: Carlos Torres at ctorres2@bloomberg.net Vince Golle
Article source: http://www.freep.com/story/news/nation/2014/09/20/nbc-chris-christie-bridge-scandal/15950527/
In one of the first signs that a global slowdown will limit how fast the world’s largest economy will grow, the trade deficit in the U.S. widened in September as exports slumped from a record. The gap grew by 7.6 percent to $43 billion, the biggest since May, from $40 billion in August, C...
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