Ahead Of The Bell: Trade Deficit
The Associated Press
06/10/09 - 06:26 AM EDT
WASHINGTON (AP) The U.S. trade deficit likely increased slightly in April, reflecting rising world crude oil prices.
Wall Street expects the trade deficit to edge up to $29 billion in April, according to the consensus of economists surveyed by Thomson Reuters. The trade deficit widened to $27.6 billion in March from $26.1 billion in February, which had been the smallest gap in nine years.
Through the first three months of this year, the trade deficit was running at an annual rate of $359.7 billion, down significantly from last year's $681.1 billion.
The Commerce Department is scheduled to release the April trade report at 8:30 a.m. EDT Wednesday.
Economists believe the deficit this year will be sharply lower, reflecting a recession in the U.S. which has crimped demand for imports.
Imports have been falling at a faster pace that U.S. exports, which also have been hurt by the economic hard times as the downturn that began here spread to many of America's major trading partners.
Lower oil prices also have helped reduce the trade deficit. While prices have been rising in recent weeks, the average price of around $70 per barrel for crude oil is still much lower than the all-time highs approaching $150 per barrel that were hit last summer.
Economists at IHS Global Insight said they expect the trade deficit would widen in April with the increase dominated by rising oil imports, reflecting higher global prices.
The U.S. economy is struggling to emerge from a recession that began in December 2007, and deepened last fall when a severe financial crisis hit the country's banking system.
The International Monetary Fund predicts the global economy will suffer the biggest drop in activity this year since the Great Depression of the 1930s.
Because of that weakness, economists do not believe that exports, which had been one of the few bright stops for the U.S. economy, will be able to lead the recovery. Instead, they are looking for consumer spending to pick up, helped by President Barack Obama's $787 billion economic stimulus program.
The overall economy, as measured by the gross domestic product, contracted at the sharpest rates in a half-century over the last three months of last year and the first quarter of this year. Economists believe that the GDP is contracting in the current quarter, but at a slower rate of around 2 to 3 percent, compared with 5.7 percent in the first quarter.
A rebound in consumer spending should help stabilize the economy this summer and bring a small amount of growth by the final quarter of this year, many analysts say.
American manufacturing companies have struggled because of weak domestic demand and the slump in exports. U.S. manufacturing giants like 3M Co. and Honeywell International Inc. derive a large part of their sales from foreign markets.
Maplewood, Minn.-based 3M, maker of Scotch tape, Post-It Notes and automotive parts, saw sales plummet in the first quarter, due partly to lower overseas demand.
Honeywell, headquartered in Morristown, N.J., makes aircraft equipment, specialty chemicals and building control systems. It has warned that the deepening global recession will make 2009 a tough year.
