Surge of Chinese imports raises US trade gap to highest level in two years
A surge of imports from China helped push the US trade gap with the rest of the world to its highest level in almost two years in June, official figures showed yesterday.
The trade deficit jumped by 18.8pc to $49.9bn, according to the US commerce department. That easily surpassed economists' expectations and brought the deficit to its highest level since October 2008.
Exports dropped by the most in more than a year. Stocks plunged after the report, extending a global slide on growing concern the recovery worldwide was slowing as a report showed output in China cooled and the leader of the Bank of England said UK growth will be weaker than previously forecast.
Yesterday's trade data also signaled the US economy slackened more than estimated for the last quarter.
"We're going to get less of a boost from exports in the second half," said Aaron Smith, a senior economist at Moody's Economy.com.
"It's consistent with slower global growth."
The Standard & Poor's 500 Index dropped 2.5pc to 1,093.36 at 11.55am in New York on speculation yesterday's Federal Reserve move to stimulate the economy meant the recovery is less robust than policymakers projected.
Adjusted for inflation
The yen rose to a 15-year high against the dollar, and the yield on the two-year treasury note dropped to an all-time low.
The June trade balance adjusted for inflation, which is the figure used to calculate gross domestic product, increased to $54.1bn, the highest since February 2008, from $46bn in May.
The gap was larger than the average $42.3bn a month in the first quarter.
The figures prompted some economists to reduce estimates for second-quarter growth to around 1pc to 1.5pc. Michael Feroli, chief US economist at JPMorgan Chase & Co in New York, said estimates growth from April through June at a 1.1pc annual rate.
The US commerce department reported on July 30 in its initial estimate that the economy expanded at a 2.4pc annual pace in the second quarter.
On Tuesday, Fed policymakers announced more steps to bolster an economy that wasn't growing as much as projected. The Fed's Open Market Committee said in a statement that "the pace of economic recovery is likely to be more modest in the near-term than had been anticipated."
The Fed said it will reinvest holdings of agency debt and mortgage-backed securities, the first attempt by the central bank since March 2009 to keep the economy from relapsing into recession.
Exports decreased to $150.5bn in June from $152.4bn, reflecting fewer shipments of semi-conductors, computers and steel-making materials.
Imports rose in June to $200.3bn from $194.4bn, led by telecommunications equipment, automobiles and record consumer goods.
The outlook for exports is tempered by signs growth around the world will cool. China and India, the world's two fastest growing major economies, are taking steps to prevent their expansions from over-heating. Growth in Canada, the US's largest trading partner, is slowing.
A drop in the value of the dollar, by making US goods cheaper to foreign buyers, may help brake a slide.
The dollar has declined 5pc against a trade-weighted basket of currencies since a high this year on May 20. It's down almost 1pc in 2010.