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Trade deficit up 8.5 percent to $40.3 billion

By Martin Crutsinger

AP Economics Writer

LAST UPDATED: 05:19 a.m. HST, Jun 04, 2013

WASHINGTON » The U.S. trade deficit widened in April, as demand for foreign cars, cell phones and other imported goods outpaced growth in U.S. exports.

The Commerce Department said today that the trade gap rose 8.5 percent in April from March to $40.3 billion.

Exports increased 1.2 percent to $187.4 billion, the second-highest level on record. Companies sold more telecommunications equipment, industrial machinery and airplane parts, while U.S.-made autos and auto parts also rose to an all-time high of $12.8 billion.

But imports grew an even faster 2.4 percent to $227.7 billion. Sales of foreign cars increased to $25.5 billion. Americans also bought more consumer goods, led by big gain in foreign-made cell phones.

A wider trade gap can restrain growth because it means U.S. consumers and businesses are spending more on foreign goods than U.S. companies are taking in from overseas sales.

But Joel Naroff, chief economists at Naroff Economic Advisors, said the wider deficit does show growth in the U.S. remains stronger than most others nations. And that growth has helped fuel more spending by consumers on imported goods.

"The U.S. economy may not be robust but with growth continuing, the demand for foreign goods is picking up," Naroff.

Most economists said trade will likely be neutral in the April-June quarter after subtracting slightly from growth in the January-March quarter. They expect economic growth has slowed to an annual rate of around 2 percent, down from a 2.4 percent rate in the first quarter.

Still, a weaker global economy is reducing demand for U.S. exports and that could weigh on growth this year.

Europe's recession continues to be a problem for U.S. companies. The deficit with the 27-nation European Union grew 25.6 percent to $12.4 billion. U.S. exports to the region declined 7.9 percent, while imports from the region rose slightly.

The politically sensitive deficit with China surged to $24.1 billion, the highest level since January and the largest with any single nation. Imports jumped 21 percent, while exports fell 4.7 percent. The March deficit had been artificially lowered by shipping disruptions caused by the Chinese New Year holiday.

The April deficit with South Korea climbed to a record $2.4 billion. Imports from that country rose to an all-time high of $5.6 billion.

Fewer exports have slowed activity at American factories, according to a measure of U.S. manufacturing released Monday.

The Institute for Supply Management said Monday that its index of manufacturing activity fell to 49 last month from 50.7 in April. It was the lowest reading since June 2009 and the first time the index had slipped below 50 since November. A reading under 50 indicates contraction in manufacturing.

A measure of export orders in the ISM report fell to its lowest level since January.

The weakness abroad has coincided with less investment by U.S. businesses, possibly out of concern that government spending cuts could hobble economic growth.

The deficit so far this year is running at an annual rate of $491.9 billion, down 8 percent from the revised annual deficit of $534.7 billion for 2012.

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HD36 wrote:
The US has had a trade deficit in every year since 1980. The fact that its up $40.billion is clear evidence that the Federal Reserve central bank planning policy of Quantitative Easing does nothing to grow the real economy. In fact, their $85 billion dollar a month purchases of government paper have perverted interest rates to near 0%. Without a real interest rate you don't have capitalism. It kills savers and rewards the big money players who get their hands on the money first. No wonder Americans are spending more on imports. But now there's a bubble in subprime auto loans. Americans went further into debt if the trade deficit increased. Descretionary income dropped , and so did the manufacturing numbers. The result is that countries like China have so much dollars, they have to buy prime properties in Seattle because our biggest export is Treasury bonds, (US Debt). A widening trade deficit is not a sign of economic recovery.
on June 4,2013 | 06:36AM
kailua000 wrote:
so when do we start collecting all the money that is owed to the US?
on June 4,2013 | 06:39AM
Maneki_Neko wrote:
Right after we pay off our debts to China.
on June 4,2013 | 08:33AM
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