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US trade deficit widens fuelled by auto and oil imports

Saturday, November 14th 2009 - 13:44 UTC
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The success can be partly attributed to the federal “cash for clunkers” auto trade-in program. The success can be partly attributed to the federal “cash for clunkers” auto trade-in program.

United States trade deficit widened in September by the most in a decade, reflecting rising demand for imported oil and automobiles as the economy rebounded from the worst recession since the 1930s.

The gap grew a larger-than-anticipated 18% to 36.5 billion US dollars, the highest level since January, from a revised 30.8 billion in August, the Commerce Department said Friday in Washington with imports surging by the most in 16 years.

Demand for foreign products may remain elevated in coming months as US consumer and business spending improve and companies aim to prevent inventories from collapsing even more.

Exports may also rise as expanding economies in Asia and Europe and a weak dollar drive demand for US goods, giving manufacturers a lift. However the US dollar dropped against the Euro and the Yen after the report.

Deficit projections ranged from 28.6 billion to 34.1 billion from an initially reported 30.7 billion USD in August. A collapse in world trade earlier this year brought the gap down to 26.4 billion USD in May, its lowest level since November 1999, as imports plunged even faster than exports.

Imports climbed 5.8%, the most since March 1993, to 168.4 billion USD. The figures reflected a 4.1 billion increase in imported oil as the cost of a barrel of crude climbed to the highest level since October 2008 and volumes also rose. Purchases of foreign-made autos and parts surged by 1.7 billion to 16.4 billion, due mainly to a 1.3 billion increase in imports from Canada and Mexico.

The federal “cash for clunkers” auto trade-in program, which expired in late August, generated momentum in car sales and boosted demand for parts and supplies. Automotive inventory restocking is also boosting demand for foreign-made autos and parts.

Imports from the oil cartel OPEC rose to 11.9 billion in September, the highest since November 2008.

Exports rose 2.9% to 132 billion USD, the most this year, propelled by sales of civilian aircraft, industrial machines and petroleum products. The dollar this month was down 12% from a five-year high reached in March against a trade-weighted basket of currencies from its biggest trading partners.

China’s economy grew 8.9% in the third quarter from the same period in 2008, the best performance in a year. Exports to the Asian nation were the highest since October, even as imports from China also climbed.

The world’s largest economy expanded at a 3.5% annual rate in the third quarter, the best performance in two years following the worst contraction in seven decades.

But the closely watched University of Michigan consumer confidence survey now stands at the lowest since August. Figures indicate that in November, sentiment fell to 66.0 - below economists' forecasts of 71.0 and lower than the reading of 70.6 in October.

The accompanying statement said this was down to “the grim financial realities faced by consumers as well as weaker economic prospects for the year ahead”.

It also pointed out that the decline in confidence was already in place before last week's announcement that the unemployment rate had risen to 10.2%.

Categories: Energy & Oil, United States.

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