Smaller April trade gap raises GDP hopes
The U.S. trade deficit shrank much more than expected in April, raising hopes for stronger economic growth as the weakening dollar helped trim imports and boost exports to a record.
The trade gap narrowed 6.2% to $58.5 billion from a downwardly revised estimate for March, the Commerce Department reported Friday, adding to signs that U.S. economic growth could top 3% or even 4% in the second quarter.
“The latest data will lead to further upward revisions [in gross domestic product], given the marked improvement in the real trade numbers,” said Alan Ruskin, chief international strategist at RBS Greenwich Capital.
Analysts surveyed before the report had pegged the April trade gap at $60 billion to $66.9 billion.
Despite the surprisingly small April deficit tally, some cautioned about reading too much into one month’s data.
“The overall deficit remains an unhealthy 5.1% of GDP and will likely rise in May as petroleum imports rebound and imports from China continue to surge,” said Peter Morici, an economics professor at the University of Maryland.
The Commerce Department also revised its estimate of the 2006 trade deficit to $758.5 billion from $765.3 billion.
Many economists have worried that higher gasoline prices and a slumping housing market would undercut U.S. growth.
But a slew of recent economic data, including the trade report, have pointed to a stronger U.S. economy after it grew an anemic 0.6% in the first quarter.
“The trade numbers are a positive sign. That can’t hurt in this environment. But interest rates going up and energy prices going up are my two biggest concerns,” said Alan Lancz, president of Alan Lancz & Associates Inc. in Toledo, Ohio.
U.S. exports rose 0.2% to a record $129.5 billion from a revised $129.2 billion in March. The March figure was revised up a hefty $3 billion.
Robust growth in Canada, Europe and Asia, “in conjunction with the very competitive level for the U.S. dollar,” is propelling exports higher and providing a solid underpinning for U.S. economic expansion, said Brian Bethune, U.S. economist with Global Insight.
Exports of goods and services set records, and foods, feeds and beverages, industrial supplies and materials and consumer goods also hit all-time highs.
A 1.9% drop in overall imports also helped rein in the trade deficit, despite a jump in the average price of imported oil to $57.28 a barrel, which boosted the dollar value of oil imports to the highest since September.
Imports from China increased 6.6% in April to $24.2 billion, while U.S. exports to that country fell 11.5% to $4.8 billion. As a result, the closely watched trade gap with China swelled 12.3% to $19.4 billion.
