Economic growth slowed by trade gap
A widening U.S. trade deficit has become a substantial drag on economic growth as the country's exports struggle to keep pace with the swelling sums that Americans are again spending on imported goods.
The rise in the trade deficit, including an abrupt 16 percent jump in June, is a chief reason economists are downgrading estimates for recent U.S. economic growth. Statistics to be released Friday are expected to show that the economy grew more slowly from April to June than initially thought, with a group of analysts polled by Bloomberg cutting their growth estimates to an annualized rate of 1.4 percent, down from 2.4 percent as reported by the government late last month.
The June trade shortfall of almost $50 billion was the largest in 19 months. Analysts say it could be an anomaly, narrowing in coming months if a global economic recovery fuels heightened demand for U.S. exports.
But the spike does raise fresh concerns about whether some of the same factors that led to the economic crisis, including U.S. overconsumption, are beginning to reemerge. The yawning deficit may also prove frustrating for the Obama administration as it seeks to create jobs by boosting U.S. exports.
Companies at the center of the trade debate portray an economy still in transition from recession to growth. U.S. oil imports are up and businesses are restocking their shelves with consumer goods - signs of recovery. But the rebound in global economic activity has yet to benefit U.S. exports.
At U.S. firms with operations around the globe, executives say they're stoking production, but that increase often hasn't translated into more exports.
Officials at Cummins Inc., an Indiana-based maker of engines and power systems, say that business is booming in such places as China and India but that new orders for its equipment are being met largely at its factories abroad.
"Almost everything we sell in China is made in China, and those factories are at capacity right now," spokesman Mark Land said. "The strength in those markets helps us overall, but our manufacturing capacity creates a limited need to export."
A range of companies in other sectors considered important for U.S. trade offered other explanations for the recent increase in the deficit.
Export revenue for staple U.S. commodities, for instance, has been flat despite rising sales because prices are down. Products that require a long lead time before delivery, such as aircraft, are enjoying a surge in overseas orders, but it could be years before that revenue is recorded.
The United States typically enjoys a trade surplus in the sale of civilian aircraft but the figure fell sharply in the first half of 2010 compared with the year before - a hangover from the recession that won't work out of the system until perhaps 2012, said Boeing spokesman Tim Neale. Aircraft orders are increasing worldwide, he said, and the company is planning to expand several production lines - but not until next year.
"We have a backlog of $252 billion - firm orders just waiting to be built," he said.