|The US trade deficit widened in July, suggesting that consumer spending - 70 percent of economic activity - is rising. (Stephen Morton/Bloomberg News)|
Trade data show recession fading
Figures suggest job market mired
WASHINGTON - The ending of the recession is reviving global trade, increasing US imports by a record amount in July and boosting foreign demand for American goods for a third straight month.
Although the job market remains a long way from recovering, first-time claims for unemployment benefits fell more than expected last week, offering some cause for optimism.
The jump in imports could be a sign that consumer spending is recovering, economists said. That is good news because such spending accounts for 70 percent of economic activity.
“Domestic demand has picked up now that we have shifted from recession to recovery,’’ Bernard Baumohl, chief economist for the Global Outlook Group, said in a note to clients.
The Commerce Department said yesterday that the trade deficit rose 16.3 percent to $32 billion in July. Economists expected an imbalance of $27.4 billion.
Imports rose 4.7 percent to $159.6 billion, the largest monthly advance on records that date to 1992 and the second consecutive gain after 10 straight declines. The rebound reflected a 21.5 percent spike in imports of autos and auto parts, partly due to increased production at US auto plants owned by General Motors and Chrysler that had been slowed when the companies were struggling to emerge from bankruptcy protection.
Exports edged up 2.2 percent to $127.6 billion. It marked the third straight monthly increase, but left exports well below their record level of $164.4 billion set in July 2008.
The export gains reflected big increases in shipments of civilian aircraft, computers, industrial machinery, and medical equipment.
Some economists saw the increased imports as a sign that retailers and manufacturers are rebuilding their inventories, which could lead to greater production.
“Eventually the factories have to come back online to restock the shelves,’’ said Carl Riccadonna, senior US economist at Deutsche Bank Securities, which raised its forecast for third-quarter economic growth to 3 percent from 2 percent.
American companies have been hampered by a drop in demand at home and overseas as the recession that began in the US spread worldwide. But economists hope that a rebound in global economies and further weakening in the value of the dollar will boost exports in coming months. A weaker dollar makes US products less expensive overseas.
So far this year, the deficit is running at an annual rate of $355.5 billion, about half of last year’s total. Economists believe the deficit will keep rising, reflecting stronger growth in the United States and rising oil prices. They expect the imbalance in 2010 will approach levels seen before the recession hit.
On the jobs front, the Labor Department said initial claims for unemployment insurance fell to a seasonally adjusted 550,000 from an upwardly revised 576,000 in the previous week. The number of people continuing to receive benefits fell by 159,000 to nearly 6.1 million, the lowest level since early April.
Still, unemployment claims remain significantly above levels associated with a healthy economy and indicate jobs remain scarce. Weekly initial claims are generally at 325,000 or below in a growing economy. A year ago, 3.5 million people were receiving unemployment aid.
“The labor market’s healing process is agonizingly slow,’’ Joshua Shapiro, chief economist at MFR Inc., wrote to clients.
A Labor Department analyst said that the jobless figures for seven states, including California and Virginia, were estimated because state governments were unable to provide data due to the short holiday week.