Trade Gap Probably Widened, Imports Grew: U.S. Economy Preview

Trade Gap Probably Widened, Imports Grew: U.S. Economy Preview

Nov. 8 (Bloomberg) -- The trade deficit in the U.S. probably widened in September, reflecting increasing demand for foreign oil and automobiles as the economy grew, economists said before reports this week.

The gap between imports and exports increased to $31.8 billion from $30.7 billion the prior month, according to the median of 60 estimates in a Bloomberg News survey ahead of the Commerce Department’s Nov. 13 report. Labor Department data the same day may show the cost of goods from abroad rose in October for a third consecutive month.

Government stimulus has so far cushioned the world’s largest economy from the harm caused by mounting unemployment, enabling increases in consumer and business spending that are drawing in products from overseas. Exports may also grow as expanding economies in Asia and Europe and a weak dollar drive demand for American goods, giving manufacturing a lift.

“The global economy is back on its feet,” said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. “U.S. consumers are coming back and the trade deficit is starting to push back out.”

A government report two days ago showed unemployment in October rose to 10.2 percent, the highest level in 26 years. The number of jobs lost since the recession began in December 2007 climbed to 7.3 million.

A collapse in world trade earlier this year brought the U.S. gap down to $26 billion in May, its lowest level since November 1999, as imports plunged even faster than exports.

Government Stimulus

The federal “cash for clunkers” auto trade-in program, which expired in late August, generated momentum in car sales and boosted demand for parts and supplies. Automakers are also beginning to rebuild inventories.

U.S. sales for South Korea-based Hyundai Motor Co. increased in September for the third month in a row, while Toyota Motor Corp. is boosting production of models such as Corollas and Camry sedans to rebuild U.S. inventory.

“Our inventories are continuing to recover with a very good pipeline as we move into the fourth quarter,” Robert Carter, Toyota’s North America sales chief, said on a conference call last month.

First-time tax credits for homebuyers have also helped boost sales of homes, in turn bolstering demand for imported construction materials and appliances.

The U.S. economy expanded at a 3.5 percent annual rate in the third quarter, the best performance in two years. Economists surveyed last month forecast a 2.4 percent rate of growth this quarter and for 2010.

Shares Climb

Stocks have surged since March on signs the recession was easing. The Standard and Poor’s 500 Index has gained 58 percent since reaching a 13-year low March 9.

Exports are also rising as demand picks up in China, Japan and the European Union in response to global stimulus efforts. China’s economy grew 8.9 percent in the third quarter from the same period in 2008, the best performance in a year.

“Stimulus programs should have maximum impacts in the first half of 2010, and some governments may expand programs to provide additional support,” Mike DeWalt, head of investor relations for Caterpillar Inc., the biggest maker of earth- moving equipment, said on a conference call Oct. 20.

The Labor Department’s report on import prices may show the cost of goods from abroad rose 1 percent in October as crude oil climbed, according to the median estimate of economists surveyed. From a year earlier, import prices probably fell 5.6 percent, according to the survey.

An improving economy may bolster consumer confidence even as the job market continues to deteriorate. The Reuters/University of Michigan preliminary sentiment index for this month, also due Nov. 13, will rise to 71 from 70.6 in October, according to the survey median.

Finally, the Labor Department may report Nov. 12 that initial jobless claims fell to 510,000 last week, the fewest since January, from 512,000 the prior week, according to the median forecast.



Bloomberg Survey

===============================================================
Release Period Prior Median
Indicator Date Value Forecast
===============================================================
Initial Claims ,000’s 11/12 7-Nov 512 510
Cont. Claims ,000’s 11/12 31-Oct 5749 5700
Federal Budget $ Blns 11/12 Oct. -155.5 -150.0
Trade Balance $ Blns 11/13 Sept. -30.7 -31.8
Import Prices MOM% 11/13 Oct. 0.1% 1.0%
Import Prices YOY% 11/13 Oct. -12.0% -5.6%
U of Mich Conf. Index 11/13 Nov. P 70.6 71.0
===============================================================

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