Slumping Exports Fuel Surge In U.S. Trade Deficit Gap Widens To $11.68 Billion As Exports Of Industrial Goods, Jets Decline
The U.S. trade deficit in goods and services widened 42.6 percent in July as imports of more expensive crude oil and Chinese toys soared while exports of industrial goods and jetliners slumped.
The $11.682 billion deficit, which exceeded analysts’ forecasts and sent the dollar plunging against the yen, was the highest since the government started reporting monthly trade in goods and services in January 1992. The record monthly shortfall of almost $16 billion was set in December 1985 under a system that tracked only goods.
July’s deficit “was exaggerated by oil on one side and aircraft on the other, but the message is the U.S. continues to make a big draw on foreign resources,” said Robert Dederick, an economic consultant at the Northern Trust Co. in Chicago. “Claims on our future income continue to mount.”
The trade shortfall with Japan widened 32.9 percent to $4.307 billion in July, the highest since October 1995, the Commerce Department report showed. Imports from China were at a record $4.817 billion.
Analysts said the 3.6 percent drop in overall U.S. exports to $67.191 billion in July - the second consecutive monthly decline - added momentum to the dollar’s plunge to 109.2 yen, a decline of more than a full yen. “The overall trend in exports is not as strong as it appeared,” said David Levy, an economist at the Jerome Levy Economics Institute’s forecasting center in Mount Kisco, N.Y. “That’s not to say the tide has turned for exports. Our concern is imports will be winning the race against exports for the next six months or so.”
Over the longer haul, the dollar will probably weaken and make U.S.-made goods less expensive for foreign buyers, helping bolster exports, Levy said.
For now, the numbers show that imports of goods and services rose 1.2 percent to $78.873 billion in July.
The trade report also highlighted the negative inflation implications of the rise in crude oil costs, which have continued to escalate in the wake of new tensions between the U.S. and Iraq.
Last week, oil for October delivery rose above $25 a barrel after dipping below $17 a barrel earlier in the year. “Oil may be a problem,” said Scott Brown, an economist at Raymond James & Associates in St. Petersburg, Fla. In trading Wednesday, oil for October delivery rose 58 cents to $23.89 a barrel on the New York Mercantile Exchange.
Also pushing oil prices higher was an American Petroleum Institute report showing that inventories of heating oil and related fuels posted a smaller-than-expected increase last week as demand increased and imports declined.
Separately, a National Association of Home Builders survey showed prospects for the U.S. housing market deteriorated in September. The NAHB’s housing market index declined to 56 in September from 57 in August. A reading above 50 suggests more respondents are seeing “good” conditions than “poor” conditions for home sales.
Today, the Commerce Department is expected to report that starts of new housing construction declined 0.9 percent in August, according to a Bloomberg Business News survey.