The US trade deficit unexpectedly narrowed in August as exports climbed to the highest level of the year and oil imports plunged.
The gap fell 3.6 per cent to $30.7 billion from a revised $31.9 billion in July, the Commerce Department said today in Washington. A rebound in auto making contributed to a jump in exports to Canada, while a drop in the number of barrels of petroleum bought abroad swamped an increase in fuel prices.
More than $2 trillion in government stimulus programs are reviving demand from Asia to Europe, ensuring American factories benefit from growing sales overseas as the dollar falls. Gains in production and the need to replenish depleted inventories mean imports will probably also grow in coming months.
“The export picture is brightening,” Joseph Brusuelas, a director at Moody’s Economy.com in West Chester, Pennsylvania, said before the report. “Imports will likely rise as the domestic economy gradually recovers and inventory liquidation slows,” so trade will have a neutral effect on growth in 2010, he said.
The trade gap was projected to widen to $33 billion, from an initially reported $32 billion in July, according to the median forecast in a Bloomberg News survey of 76 economists.
Deficit projections ranged from $29 billion to $35.3 billion.
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Exports increased 0.2 per cent to $128.2 billion, led by a $496 million gain in sales of cars and parts. Exports to Canada reached the highest level since November, in part reflecting the cross-border trade in autos.
A falling dollar, by making US-made cheaper to foreign buyers, is likely to stimulate foreign demand in coming months. The dollar yesterday fell toward its lowest level since August 2008 against the currencies of six major US trading partners.
Imports fell 0.6 per cent to $158.9 billion in August after jumping the prior month by the most in 16 years.
Purchases of crude oil from overseas dropped as the US imported 8.66 million barrels a day on average, down from 9.56 million in July.
The average price per barrel rose to $64.75 from $62.48.
After eliminating the influence of prices, which are the numbers used to calculate gross domestic product, the trade deficit narrowed to $37.7 billion from $38.8 billion.
The trade gap with China was little changed in August as both exports and imports climbed. Group of Seven officials, in a statement this month, welcomed China’s “continued commitment” to a more flexible currency, which they said would promote balanced international expansion.
Trade With China
US policy makers and economists have urged China to further reduce its export reliance by eliminating manufacturing subsidies that make exports cheaper, and allowing the yuan to appreciate against the dollar. The yuan has stayed around 6.83 per dollar since July 2008, after jumping 21 per cent in the prior three years following the end of a dollar peg.
Treasury Secretary Timothy Geithner, in a press conference during the Group of 20 summit in Pittsburgh last month, praised steps China already has taken to strengthen its economy.
“If you look at the composition of growth so far, their current-account surplus, their trade surplus is coming down, and domestic demand is getting stronger, and that’s a good sign of the shift,” Geithner said.
The US likely saw a return to growth in the third quarter after contracting in the prior six months, according to economists surveyed by Bloomberg, as the Obama administration’s $787 billion stimulus package started to have some effect.
Global Growth
The euro area is stabilizing after governments injected billions in the 16-nation region’s economy through tax cuts and spending incentives. Gross domestic product in the area fell 0.2 per cent in the second quarter, after a 2.5 per cent drop in the prior three months, the European Union reported this week.
The Chinese government is spending 4 trillion yuan ($590 billion) to stimulate the world’s third-largest economy.
The International Monetary Fund, which in the past year has shored up economies from Iceland to Pakistan, on October 1 lifted its global forecast, saying the world will expand 3.1 per cent next year after a July estimate of 2.5 per cent. The lender raised the outlook for China, which may grow 9 per cent in 2010, compared with 1.7 per cent growth in Japan, 1.5 per cent in the US and 0.3 per cent in the euro region.
Companies seeing a turnaround include Alcoa Inc, the largest US aluminum producer. New York-based Alcoa reported an unexpected third-quarter profit, helped by improving metal prices, job cuts and lower raw-material costs. Chief Executive Officer Klaus Kleinfeld said the second half of the year is better in many industries and regions.
“We do clearly see growth, substantial growth, I might add, in China,” Kleinfeld said on an October 7 conference call, adding that there also is “stabilisation in North America.”