WASHINGTON — The U.S. trade deficit edged up in April as crude oil prices hit the highest level since December. But the imbalance so far in 2009 remained well below last year’s pace and economists expect that to continue as the global recession dampens demand for automobiles, heavy machinery and other goods.
The Commerce Department said today that the deficit rose for a second straight month in April, climbing 2.2 percent to $29.2 billion. That was slightly higher than economists’ expectations.
The overall deficit is running at an annual rate of $361.1 billion, about half of the $695.9 billion total for all of 2008. The drop in imports has been greater than the fall in exports, which also are down significantly as the global recession cuts demand for U.S. products in key markets.
Because of that weakness, economists do not believe that exports, which had been one of the few bright stops for the U.S. economy, will be able to lead the recovery.
“When growth slows, that means demand for everything comes down and that is true not just in the U.S. but everywhere else,” said Joel Naroff, chief economist at Naroff Economic Advisors.
For April, exports of goods and services fell $2.8 billion, or 2.3 percent, to $121.1 billion, the smallest monthly total since July 2006. The drop included big declines in sales of industrial engines, machinery, and motor vehicles and parts. Sales of commercial aircraft rose.
Imports dipped $2.2 billion, or 1.4 percent, to $150.3 billion, the lowest total since September 2004. Shipments of foreign-made cars, oil drilling equipment, computers and machine tools all fell.
But imports of petroleum bucked the downward trend, rising 2.1 percent to $18 billion. The average price for a barrel of imported crude oil jumped to $46.60 in April, from $41.36 in March. It was the highest level since December and is expected to rise in coming months given recent increases in crude oil prices.
Oil prices rose above $71 per barrel today to reach a high for this year as investors purchased crude as a hedge against the inflation risks posed by a weakening U.S. dollar. Even with the recent increases, oil prices remain far below last year’s levels when they jumped to record-highs approaching $150 per barrel.
Paul Dales, U.S. economist at Capital Economics in Toronto, said that even if oil prices keep rising and push the trade deficit toward $40 billion, that would “reverse only a third of the narrowing … over the past 12 months.”
Dales expects oil prices will retreat to around $50 per barrel. That would keep the nation’s current account trade deficit, the broadest measure of trade, at around 2 to 3 percent of the overall economy, less than half the level reached three years ago.
Still, American manufacturing companies have struggled because of weak domestic demand and the slump in exports. 3M Co., Honeywell International Inc. and others derive a large part of their sales from foreign markets.
Maplewood, Minn.-based 3M, maker of Scotch tape, Post-It Notes and automotive parts, saw sales plummet in the first quarter, due partly to lower overseas demand.
Honeywell has warned that the deepening global recession will make 2009 a tough year. The Morristown, N.J.-based company makes aircraft equipment, specialty chemicals and building control systems.
The politically sensitive deficit with China increased 7.3 percent to $16.8 billion, although that imbalance through the first four months of this year is 11.1 percent below last year’s record pace, according to the Commerce Department.
The U.S. deficit with the European Union jumped to $5.3 billion in April, an increase of 20.8 percent from March. The deficit with Canada rose 58.7 percent to $1.2 billion, and the imbalance with Mexico edged up 5.3 percent to $4.1 billion.
The deficit with Japan rose 23.5 percent to $3.2 billion, partly reflecting U.S. exports to Japan dropping to $3.9 billion, the lowest level in 15 years. Japan has been struggling with its own steep recession.
The $29.2 billion deficit in April followed a revised $28.5 billion March deficit which had been originally reported as a $27.6 billion imbalance. Part of the revision reflected an annual benchmarking of the trade figures to incorporate more accurate data.
The U.S. economy is struggling to emerge from a recession that began in December 2007, and deepened last fall when a severe financial crisis hit the country’s banking system. The International Monetary Fund predicts the global economy will suffer the biggest drop in activity this year since the Great Depression of the 1930s.
Economists are looking for consumer spending to pick up and lead a recovery, helped by President Barack Obama’s $787 billion economic stimulus program.
The overall economy, as measured by the gross domestic product, contracted at the sharpest rates in a half-century over the last three months of 2008 and the first quarter of this year. Economists believe that the GDP is contracting in the current quarter, but at a slower rate of around 2 to 3 percent, compared with 5.7 percent in the first quarter.
A rebound in consumer spending should help stabilize the economy this summer and bring a small amount of growth by the final quarter of this year, many analysts say.
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