July 8, 2020

Slowing Global Demand Widens Trade Deficit

The Commerce Department said on Tuesday the trade gap increased 4.9 percent to $42.2 billion. In a sign of weak domestic demand, imports hit the lowest level in one and a half years.

“The report tells a tale of weakening economic growth momentum both domestically and globally,” said Millan Mulraine, a senior economist at TD Securities in New York.

Economists, who had expected the trade deficit to widen to $42.6 billion in October, said Hurricane Sandy could have disrupted trade flows. The storm, which struck the East Coast in late October, shut ports in New York and New Jersey.

However, the Commerce Department did not indicate that Sandy was a factor. The wider trade gap in October reflected a 3.6 percent decline in exports of goods and services to $180.5 billion. That was the biggest percentage drop in exports since January 2009.

Exports have been one of the pillars supporting the economy since the 2007-9 recession ended. The slide in October’s export growth was telegraphed by weak manufacturing surveys and reflected slowing global demand.

Imports of goods and services fell 2.1 percent, to $222.8 billion, in October, the lowest since April 2011. Economists said the decline in imports was hardly surprising, given a weakening in consumer demand in recent months.

In October, the inflation-adjusted trade deficit narrowed to $46.2 billion from $46.6 billion in September. While that implied trade would make another small contribution to gross domestic product in the fourth quarter, economists said the size of the decline in exports raised the bar high for that.

In addition, a strike by West Coast dock workers in late November and early December most likely reduced trade last month.

A third report showed confidence among small-business owners fell in November; economists pinned that on the fears of deep government spending cuts and higher taxes, which could drain about $600 billion from the economy early next year.

The National Federation of Independent Business said on Tuesday that its optimism index fell 5.6 points to 87.5 last month, the weakest reading since March 2010.

While exports to the 27-nation European Union rose 1.4 percent in October, there were substantial declines in goods shipped to France, Germany, Italy and Britain. Exports to the European Union in the first 10 months of 2012 were down 0.7 percent compared to same period in 2011.

American exports to Latin America also fell in October, and shipments to Japan were down 8 percent.

Although exports to China, which have been growing more slowly than in recent years, surged 23.1 percent in October, imports rose to a record. That pushed the United States’ trade deficit with China to a record $29.5 billion.

Article source: http://www.nytimes.com/2012/12/12/business/economy/decline-in-exports-hurts-us-trade-deficit.html?partner=rss&emc=rss

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