U.S. trade deficit widens to $42.3 billion in May

[OhioChick]

Source: AP

Tuesday, July 13, 2010, 8:49 AM

WASHINGTON -- The U.S. trade deficit widened in May to the highest level in 18 months as a rebounding economy pushed up demand for imports of foreign-made cars, computers and clothing.

The trade deficit increased 4.8 percent to $42.3 billion, the largest imbalance since November 2008, the Commerce Department reported today. American exports of goods and services rose 2.4 percent but this increase was outpaced by a 2.9 percent rise in imports.

American manufacturing has been a standout performer so far in this recovery, benefiting from a global economic recovery. But the concern is that export sales will be hurt by the European debt crisis, which has dampened growth prospects in Europe.

Through May, the U.S. trade deficit is running at an annual rate of $474.8 billion, up by 26.6 percent from $374.9 billion deficit for all of 2009. That had been the lowest annual trade gap since 2001, another year when the country was in recession.

The rise in the May deficit came despite the fact that oil imports dropped by 9.1 percent to $27.6 billion as both the price of oil and the volume of shipments declined slightly.



Read more: http://www.cleveland.com/business/index.ssf/2010/07/us_trade_deficit_widens_to_423.html

[dmallind]

1. Both imports and exports up - good news. Global spending arises. NT

[fasttense]

2. How in any way can this mean we are recovering?

"American manufacturing has been a standout performer so far in this recovery, benefiting from a global economic recovery."

Our trade deficit increased or widened. Meaning we shipped into the US even more than normal and meaning we shipped out even less than normal. How in the hell does this indicate American manufacturing has improved?

If American manufacturing were improving we would see a decline in shipped in goods, and an increase in shipped out goods.

Does the AP only hire morons?

[dmallind]

4. Funny - don't remember you cheering when trade deficit narrowed dramatically

Just a few months ago.


Both exports and imports were up. That means people are spending globally including in the US, and that global production is seeing increased demand. That's why it's good. We are a 70% consumer-driven economy with less than 70% manufacturing. That's why we have a trade deficit and why increasing it (which is another way of saying an increased demand for US dollars) is good.

[brentspeak]

5. The threat of a double-dip recession as a result of the trade deficit is "good"?

http://www.latimes.com/business/la-fi-econ-trade-20100714,0,6591387.story

Surprise jump in trade deficit worries economists

By Don Lee, Los Angeles Times

July 13, 2010 | 9:54 a.m.


Reporting from Washington —
The U.S. trade deficit jumped unexpectedly in May to the highest level since November 2008, prompting some analysts to cut their second-quarter economic growth forecasts sharply and economists to warn of rising risks of a double-dip recession.

snip

But American purchases of foreign-made computers, machinery and particularly household goods, notably from China, increased significantly in May. Analyst Diane Swonk attributed much of the surprising import gains to stockpiling by retailers and producers who are fearful of a potential trade war with China.

"This is a distortion; it's not reflective of domestic demand," said Swonk, chief economist at Mesirow Financial in Chicago, referring to the higher deficit in May. She added that the report was disturbing because it points up the political and economic risks weighing on the economy.

"Now, a rising trade deficit and continued weakness among regional banks threaten to derail the recovery," Peter Morici, a University of Maryland professor and former chief economist at the U.S. International Trade Commission, wrote in an analysis following Tuesday's report.

Other analysts worry that persistent high trade deficits are resulting in increased borrowing to finance purchases as well as a buildup of unsold domestically produced goods, which in turn could lead to reduced work hours or layoffs. Soaring deficits financed by cheap money from abroad contributed to the latest recession.

The recession sharply reduced the U.S. trade gap, with imports falling faster than exports. But in recent months, as the U.S. economy has turned the corner, the deficit has been widening again.

U.S. exports of goods and services in May increased at a solid pace, rising 2.4% from April to $152.3 billion. Most of the gains came from stronger shipments of capital goods such as industrial machinery.

For the first five months of this year, American exports were up 17.7% from the same period of 2009, to $739.5 billion, helping fuel a rebound in the manufacturing sector. At that rate, President Obama would have no trouble meeting his goal of doubling exports in five years in a bid to create more jobs.

But the problem is that U.S. imports — long much bigger than exports — have begun to expand at an even faster pace than exports. And that rate does not add to, but boosts the trade deficit, which subtracts from economic and job growth.

[dmallind]

6. Hardly a consensus here. Time to worry if gap grown much bigger over much longer time. NT

[blue97keet]

7. You gotta be kidding

"We are a 70% consumer-driven economy with less than 70% manufacturing. "
That is exactly why we are sinking in the debt hole and neither "stimulus" nor tax cuts nor spending cuts nor anything but cutting the trade deficit and the outflow from our economy can get us out. It is a leaky plumbing problem.

[Populist_Prole]

3. The media will always frame it to support the status quo on trade

After decades of watching/reading the news, I see we just can't win. They'll just frame the stats so as to continue to support unrestricted free trade. For example:

1) If the trade deficit goes up ( even a huge amount ) the finance media shrugs it off as inconsequential OR spins it as a positive by saying how "consumers" are feeling confident, or how great it is that "consumers" get all this cheap stuff blah blah blah. Nothing said of the CITIZENS who used to be "consumers" back before their jobs were exported.

2) The smallest of drops in the trade deficit ( occasional downward dips in an otherwise big upward trend ) is ballyhooed as absolute evidence and validation of the present free-trade / globalistic policy in which our gutted manufacturing base is somehow going to export our way out of the deficit ( which they don't care about anyway ) feel-good lip-service.

They'll just trot out either of these 2 mantras to fit whatever case. I believed it all....Once....20 years ago....till I saw the disconnect between propagands and reality.