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US trade deficits widens as exports hit 6-month low

Deficit increases to $44.2 billion in August, up 4.1% over July.


October 11, 2012
by The Canadian Press

WASHINGTON—The US trade deficit widened in August as exports fell to the lowest level in six months, a worrisome sign that a slowing global economy is cutting into demand for US goods.

The deficit increased to $44.2 billion in August, the biggest gap since May and a 4.1% increase from July, the Commerce Department said Thursday.

Exports dropped 1% to $181.3 billion. Demand for American-made cars and farm goods declined. Imports edged down a slight 0.1% to $225.5 billion as purchases of foreign-made autos, aircraft and heavy machinery fell. The cost of oil imports rose sharply.

A wider trade deficit acts as a drag on growth because it means the US is earning less on overseas sales of American-produced goods while spending more on foreign products.

Economic growth slowed to an annual rate of just 1.3% in the April-June quarter. Most economists don’t expect the economy to grow much more than 2% for the rest of the year.

American manufacturers have been hampered by slumping economies in Europe, China and other key export markets. Many European countries are in recession. The region accounts for about one-fifth of U.S. exports.

The International Monetary Fund this week projected global growth of just 3.3% for the year and 3.6% in 2013. The downgrade from its July forecast reflected disappointing growth in the US, spreading recessions in Europe and a sharp slowdown in China.

There have been some hopeful signs that the US economy is improving.

Manufacturing grew in September for the first time in four months, according to a closely watched survey from the Institute of Supply Management. The growth was driven by a jump in new orders and more hiring.

The unemployment rate declined to 7.8% in September, the lowest level since January 2009. It fell because of a huge increase in the number of people who said they found jobs.

Americans are gaining more confidence in the economy and stepping up major purchases.

Auto sales rose 13% last month from a year earlier to nearly 1.2 million. Home sales have been posting solid gains, which have driven home prices higher. When home prices rise, people tend to feel wealthier and spend more freely.

©The Canadian Press