The US trade deficit narrowed more than forecast in July and filings for jobless benefits plunged last week, tempering concern the world’s largest economy is slipping back into a recession.
The trade gap shrank 14 per cent, the most since February 2009, to $42.8 billion, the Commerce Department said today in Washington. The deficit was less than the lowest forecast in a Bloomberg News survey of economists. New applications for unemployment insurance fell by 27,000 to 451,000, the lowest since July 9, according to the Labor Department.
Stocks climbed and Treasury securities fell as the reports underscored the Federal Reserve’s view that while the economy has cooled, it will avoid contraction. US exports rose to a two-year high, a source of strength for manufacturing, which has been a mainstay for the recovery.
“While the data haven’t exactly been robust, they’ve certainly been healthy enough to suggest that we’re not on the cusp of a double dip,” or a renewed recession, said Stephen Stanley, chief economist at Pierpont Securities in Stamford, Connecticut. “We’re not firing on all cylinders anymore, but manufacturing is definitely still growing.”
Morgan Stanley economists David Greenlaw and Ted Wieseman raised their forecast for third-quarter economic growth to 2.4 per cent from 2.1 per cent after the trade figures.
Economists’ forecasts
Overseas shipments increased 1.8 per cent to $153.3 billion, the highest since August 2008, while purchases from abroad declined 2.1 per cent. Economists projected a deficit of $47 billion, according to the median of 73 estimates in the Bloomberg survey. Forecasts ranged from $43 billion to $52 billion.
The Standard & Poor’s 500 Index gained 0.9 per cent to 1,108.73 at 11.26 am in New York. The yield on the 10-year Treasury note rose to 2.73 per cent from 2.66 per cent late yesterday.
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Initial jobless claims were forecast to decline to 470,000, and projections ranged from 460,000 to 482,000, according to the Bloomberg survey.
Nine states didn’t file claims data with the Labor Department in Washington because of the Labor Day holiday, a department official told reporters as the figures were released. California and Virginia estimated their claims, and the US government estimated the other seven.
‘Modestly encouraging’
“The report is modestly encouraging as claims have reversed the sharp uptick observed in previous weeks, but the Labor Day holiday means we need to see the revisions next week before coming to any firmer conclusions,” Michael Gapen, a senior US economist at Barclays Capital, said in a note to clients.
The four-week average, a less volatile measure than the weekly figures, declined to 477,750 last week from 487,000.
Caterpillar Inc, based in Peoria, Illinois, said last month it may add as many as 9,000 workers worldwide this year as sales climb in developing markets. The world’s largest construction equipment maker said about 1,250 of the jobs the company has added so far have been in the US.
The outlook for US exports is holding up as emerging economies expand. A report last week showed manufacturing in China grew at a faster pace in August. The gain in the government-backed purchasing managers’ index signaled the economy in China is stabilising after a slowdown.
US exports of industrial supplies, civilian aircraft, machinery and computers increased in July, while imports of business equipment and consumer goods fell, today’s report showed.