Saturday, 10 June 2006

US trade deficit widens as global economy stays hot

The US trade deficit should stabilise when the economy moderates. But not yet. From Reuters:

The U.S. trade gap widened to $63.4 billion in April, lower than the $65 billion shortfall Wall Street analysts had expected. However, another government report put import prices up 1.6 percent in May, more than twice the increase expected...

April imports grew 0.7 percent from the previous month to $179.1 billion, the second highest on record. Oil and other petroleum products accounted for nearly $23.4 billion of the total, although import volumes fell as prices rose...

U.S. exports, reflecting stronger growth overseas and a decline in the value of dollar in recent years, totaled $115.7 billion in April, just shy of the record high set in March.

Some good commentaries on the trade numbers from Brad Setser and Menzie Chinn, both of whom commented on the fact that the non-oil trade balance has stabilised recently. And that is notwithstanding the fact that the Chinese economy -- which is responsible for much of the growth in the US non-oil trade deficit -- is still red hot, with outstanding bank loans surging 15.97 percent year-on-year in the first five months of the year and producer prices rising 2.4 percent year-on-year in May.

Other economies are also doing well, with Japan yesterday reporting a bigger-than-expected 10.8 percent rise in core private-sector machinery orders in April and Germany reporting a 1.6 percent rise in industrial production in April, the most in more than two years. But French industrial production fell 1.4 percent in April.

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