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| Trade data point to a rebound in US economy |
| 2005-06-12 |
| Trade figures released by the Commerce Department on Friday suggested the US economy bounced back after a soft patch in March, but did not provide clear evidence that the trade deficit was stabilising. The trade deficit rose to $57bn in April, below Wall Street's consensus forecast of $58bn. March's deficit was revised down $1.4bn to $55bn. Imports and exports both hit new records in April, indicating stronger economic activity than in the previous month. The downward revision to the March data suggested that first quarter growth in gross domestic product would be revised up further, economists said. The dollar strengthened against the main currencies. The euro under pressure for the past month due to stuttering eurozone economic growth, the French and Dutch rejection of the EU constitution treaty and worries over the long-term viability of the currency fell 0.7 per cent to $1.213, a nine-month low against the dollar. Bond prices also fell after the US report, with the yield on the 10-year Treasury note rising above 4 per cent for the first time in two weeks. Alan Greenspan, Federal Reserve chairman, gave upbeat testimony on the economy this week and provided no indication that the central bank was about to cease its rate tightening campaign. Imports rose by more than 4.1 per cent in April, after the depressed March reading, with about half the increase accounted for by the higher price of oil. Exports to China rose, but the larger rise in imports meant the bilateral trade deficit rose 14 per cent to $14.7bn. In the four months to April, textile imports from China were twice as large as the same period of last year. Exports rose by 3 per cent, though more than a third of the increase was accounted for by the volatile civil aircraft component, meaning that pace of growth was unlikely to be sustained. Nariman Behravesh, chief economist at the consultancy Global Insight, said the trade figures provided further support for the Fed's sanguine view of economic prospects. "Oil played a role in boosting imports but domestic demand growth was quite strong in April. The economy is still probably expanding at about a 3œ per cent rate," he said. April's deficit was less than the average of the first three months of the year, which if sustained would mean the international economy would add to US growth rate in the second quarter. In the first four months of the year the trade deficit was almost $229bn, compared with $187bn in the same period of last year. Economists said that while the US economy continued to grow faster than Europe and Japan, and Asian governments prevented their currencies from rising against the dollar, the trade deficit was unlikely to shrink significantly. Kathleen Stephansen, director of global economics at CSFB in New York, said: "The manufacturing sector has largely shifted from the US to Asia. While Asian economies are pursuing export-led growth, it is inevitable we will see large trade imbalances with the US." High oil prices have boosted the trade deficit in recent months, meaning that the trade figures looked better in inflation-adjusted terms. |
| Posted by:too true |