US trade deficit at two-year high in April

Washington: The US trade deficit jumped to a two-year high in April, as exports declined and imports surged to a record high.

The deficit rose to $47.2 billion (Dh173.3 billion) in April, up 6.9 per cent from an upwardly revised March deficit of $44.2 billion, the Commerce Department said on Wednesday.

Exports dropped for the fourth month out of the past five, falling 0.2 per cent to $195.4 billion. Meanwhile, imports climbed 1.2 per cent to an all-time high of $240.6 billion, reflecting record shipment levels of foreign-made cars, food, computers and other goods.

A wider trade deficit can act as a drag on growth because it means US companies are earning less from their overseas markets. But it could also indicate rising US demand as the country shakes off the effects of a harsh winter.

We're obviously wary of falling back on using the weather as an excuse again, but the extreme cold winter, coupled with the drought in California, does partly explain why the US is suddenly importing a lot more food and exporting less, said Paul Ashworth, chief US economist at Capital Economics.

In 2013, the trade deficit declined by 11.4 per cent to $476.4 billion. The result was led in part by a boom in US energy production that cut America's dependence on foreign oil while boosting petroleum exports to a record high.

A larger trade gap in the first three months of this year compared to the fourth quarter shaved nearly a full percentage point from growth. Gross domestic product shrank at an annual rate of one per cent in the first quarter, also hurt by less business stocking of store shelves and a severe winter that disrupted consumer spending and factory production.

But economists expect a strong bounce back in the current April-June quarter. Some estimate that growth could hover around 3.8 per cent as the trade deficit narrows and stronger hiring boosts household incomes and consumer spending. However, the bigger-than-expected trade deficit in April may cause analysts to trim those forecasts a bit.

Many analysts say growth will remain strong at a rate around three per cent in the second half of the year.


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