Trade deficits widens in March to $27.6 billion
By: Martin Crutsinger
Tuesday, May 12, 2009
The U.S. trade deficit rose in March for the first time since last July as the global recession cut sharply into sales of American exports. The politically sensitive deficit with China increased. The Commerce Department said Tuesday the deficit widened to $27.6 billion in March, slightly lower than the $29 billion gap that economists had forecast. The March deficit was 5.5 percent higher than February's revised $26.1 billion trade gap, which had been the smallest since November 1999. Through the first three months of this year, the trade deficit was running at an annual rate of $359.7 billion, far below last year's $681.1 billion. Economists expect the deficit will remain at low levels this year as a recession in the U.S. crimps demand for foreign goods. Other reports out Tuesday showed home prices in most of the U.S. fell in the first quarter, which created buying opportunities in some states, while job openings have hit an eight-year low and companies remain reluctant to hire. The global downturn also has cut into sales of U.S. exports. That will limit the amount of improvement seen in the deficit, which is the difference between what America imports and what it sells abroad. The slump in exports has been a blow to U.S. manufacturing giants such as Boeing Co. and Caterpillar Inc. who derive a large part of their sales from foreign markets. For March, exports of goods and services fell 2.4 percent to $123.6 billion, the lowest level since August 2006. Sales of farm products dropped $2.4 billion, while exports of capital goods slid $1.7 billion, led by big declines in sales of civilian aircraft, telecommunications equipment, semiconductors, and domestic autos and auto parts. "The composition of exports suggest that the global economy is beginning to stabilize," Nigel Gault, chief U.S. economist at IHS Global Insight, wrote in a research note. "The steepest export declines are behind us. But given the weak state of overseas economies, we do not expect the U.S. recovery to be export-led." The March trade deficit also was smaller than the one the government assumed when it released its first estimate showing the overall economy, as measured by the gross domestic product, fell at an annual rate of 6.1 percent in the January-March quarter. That means the next GDP estimate for the first quarter likely will be revised to show a drop of around 5.7 percent, Gault said. Imports declined 1 percent to $151.2 billion, the lowest level since September 2004. Imports of capital goods dropped $516 million, led by declines in industrial machinery. The overall import level fell even though imports of oil rose 6.2 percent to $17.2 billion, the highest level since January. The politically sensitive deficit with China rose 10 percent to $15.6 billion in March. But for the first three months of this year, the deficit with China is running 10 percent below last year's pace. China for more than a decade has been the country with the largest trade surplus with the U.S. The gap has triggered repeated calls in Congress for a crackdown on what critics see as unfair trade practices in China that also have resulted in the loss of millions of American manufacturing jobs. But critics pushing for a tougher stance on trade said the rise in the overall deficit underscored the need for the Obama administration to take a tougher approach. "A rising U.S. trade deficit amid a steep economic downturn means that foreign trade cheating is still handicapping U.S. domestic producers and undermining American growth. It's time for President Obama to get serious about leveling the playing field," Alan Tonelson, a research fellow at the U.S. Business and Industry Council, a coalition of medium-sized U.S. manufacturing companies, said in a statement. China reported Tuesday that its global export sales fell 22.6 percent in April from the same month last year, fresh evidence that pain in the country's trade sector persists due to slumping global demand. The administration earlier this year said it will continue to hold high-level talks with China started by the Bush administration, although the frequency of the meetings was cut in half to once a year. The first meeting is scheduled for this summer in Washington. With the U.S. recession expected to last until the second half of this year and the downturn in many other nations expected to drag into 2010, economists don't expect a significant rebound in trade anytime soon. Meanwhile, home prices in the U.S. also continue to fall, although that has prompted sales gains in a handful of states. The National Association of Realtors said that median sales prices of existing homes declined in 134 out of 152 metropolitan areas compared with the same period a year ago. Nationwide, sales of foreclosures and other distressed properties made up about half of the market. Home sales fell in all but six states — Nevada, California, Arizona, Florida, Virginia and Minnesota — where buyers have been able to snap up foreclosures at a deep discount. Still, the median sales price nationwide was $169,900, down 13.8 percent from a year ago. The median price is the midpoint, which means half of the homes sold for more and half for less. The housing slump and latest hit to export sales have added to the wave of job layoffs in the U.S. There were 2.7 million jobs available nationwide in March, down from 3 million in February and 4 million a year ago, according to the Labor Department. That's also the lowest number in the eight years the department has tracked job openings. Other recent reports indicate that while layoffs may be slowing compared with the waves announced earlier this year, hiring hasn't picked up much since the department gathered the job openings data in March. The department on Friday reported 539,000 net job losses in April. While still elevated, it was the lowest level in six months and below the 700,000 monthly average during the first quarter of this year. Many economists believe the unemployment rate, which hit 8.9 percent in April, will climb to around 10 percent even if the recession ends and a recovery begins sometime this fall. Without new hiring, the unemployment rate will continue to rise. That's because many people who were discouraged and stopped looking for work at the depths of a recession customarily return to the labor market once a recovery begins. If jobs aren't available, those new job seekers are added to the total of unemployed workers. Copyright 2009 The Associated Press.