US trade deficit widens

Surge in imports of cars under US rebate scheme contributes to trade gap.

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A rise in imports of vehicles contributed to the growth in the US trade gap in July [EPA]

Exports outpaced

US imports for July stood at $159.6bn, including a $2.4bn rise in imports of cars and car parts – a 21.5 per cent over the previous month.

The dramatic increase was largely due to US demand for foreign-made cars under congress’ “cash for clunkers” rebate programme, which encouraged people to cash in their old cars for new, more fuel-efficient vehicles, analysts said.

There was also a $1.7bn increase in goods such as medical drugs, toys, clothing and televisions.

Although US exports also went up by 2.2 per cent over the previous month’s figures – the third monthly rise in succession – the increase was eclipsed by the surge in imports.
“We’re encouraged by the signs of stabilisation in the trade of US goods and services represented by today’s report, but we must remain diligent in our efforts to improve our competitiveness and innovation, and get American workers back on the job,” Gary Locke, the US commerce secretary, said.

Confidence rising

While the gap between US imports and exports is growing, the number of US workers making fresh claims for unemployment benefits fell last week to 55,000, a separate report by the US labour department said on Thursday.

The number of workers still collecting jobless benefits dropped to 6.088 million in the week ended August 29, the lowest since the week ending April 4.

“By and large, these are signs the economy is improving despite the fact the trade deficit is widening,” Michael Woolfolk, senior currency strategist at BNY Mellon in New York, said.

But another analyst warned that the US labour market was still far from a wholesale recovery.

“We haven’t seen hirings pick up yet. We might have the worst of the firings over but the companies are not confident enough in hiring,” John Canally, economist at LPL Financial in Boston, said.

The rise in imports indicates that US consumers are becoming more confident in spending their income, Canally said, but he added that analysts could revise downwards their estimates of US economic growth for the third quarter of 2009.

Source: News Agencies