MercoPress. South Atlantic News Agency

US surprises: trade deficit down; budget shortfall up

Good and bad news from United States: while the June trade deficit helped by strong farm and manufacture goods exports fell to an unexpected 56.8 billion US dollars, the July federal budget deficit soared to 102.8 billion pushed by the economic stimulus payments and more outlays to protect depositors from failed banks.

According to the Commerce Department the trade deficit for June fell by 4.1%, the lowest level in three months. Even with oil prices at record level, exports of everything from soybeans and corn to aircraft engines and heavy machinery surged by the largest amount in four years, offsetting the rising oil bill. Over the past four quarters, trade has been the US economy's standout performer contributing four-fifths of what little growth there has been. Exports of goods and services in June grew to a record of 164.4 billion, up 4% from May, the biggest percentage gain since February 2004. Imports also rose to a record in June, totaling 221.2 billion, up 1.8% from the May. This increase was driven by a 14.6% surge in petroleum imports, with an all-time high of 44.5 billion, but demand for consumer products from clothing to furniture fell sharply. Through the first half of this year, the US trade deficit is running at an annual rate of 702.8 billion, up only slightly from last year's deficit of 700.3 billion. The 2007 deficit was down 7% from 2006, marking the first annual improvement after five straight years of record deficits. The politically sensitive deficit with China rose to 21.4 billion in June, the largest monthly imbalance since the record 25.9 billion last October. However US exports to Mexico, the European Union and South and Central America all hit records in June. As to the budget the US Treasury Department said outlays were pushed up by 15 billion because of payments the Federal Deposit Insurance Corp. made to depositors at failed banks. Besides the payouts by the FDIC, outlays were increased by the final bulk mailings of government stimulus payments in July. The July deficit also looked worse than the July 2007 deficit because last year's figure was artificially deflated by timing issues that shifted about 19 billion in normal outlays into the prior month. So far this year, the US budget deficit totals 371.4 billion, more than double last year's deficit through the same time period of 157.4 billion. Through July, US government revenues total 2.094 trillion, down 1% from the same period a year ago while spending so far this budget year totals 2.466 trillion, 8.5% than a year ago. For the 2009 US budget year, which begins October first the Bush administration is now projecting a deficit of 482 billion, which would be the highest in dollar terms in history, surpassing the old mark of 413 billion set in 2004.