Tuesday, August 17, 2010

Odd widening with the trade deficit meaning an increase being recorded

Wall Street started going crazy after a trade deficit increase was shown Wednesday by the Commerce Department for the month of June. $ 7.9 billion was how much in June the trade deficit widened. Stocks immediately went down. The trade deficit also led analysts to believe that U.S. economic recovery slowed more than they thought last quarter. The recession could go into a double-dip with the trade deficit so unstable.

June U.S. trade deficit caused by strong dollar

The dollar became much stronger when those within the U.S. decided to start getting more exports from China because they’re cheaper, reports the Commerce Department. May was when the gap went from $ 42.0 billion to $ 49.9 billion. According to the Washington Post, oil prices have dropped meaning the gap should have gotten smaller. In May imports were at $ 194.4 billion. They then rose to $ 200.3 billion in June while more consumer products, auto parts and other things were being bought out of the country. Exports then went down from $ 152.4 billion to $ 150.5 billion. Industrial supplies, food and consumer goods weren’t sold out of the country as much that month.

Trade deficit is not as forecasted

The anticipated trade deficit for June was $ 42.1 billion — the median forecast of 73 economists in a Bloomberg News survey. The decline ended up being $ 42.3 billion instead which was a 19 percent decrease. Bloomberg reports the June trade deficit adjusted for inflation, which is the figure used to calculate gross domestic product, increased to $ 54.1 billion, the highest since February 2008 during the worst of the financial crisis. This has caused economists to lower their estimates from 1 to 1.5 percent within the second quarter.

More work needed on unemployment issues}

Economists nevertheless argue whether a double-dip recession is about to occur because of June’s deficit numbers. According to the Christian Science Monitor, the trade deficit isn’t really as much of a problem as U.S. unemployment rates. Nobody cared as much about the deficit in years past when unemployment was not at all an issue. We should focus on consumer demand and business investment to help the economy.

Numerous still think unemployment would decrease with better trade deficits

If global commerce is hurt because the U.S. fixes the trade deficit problem, economists are concerned that economic recovery might just take longer, reports the Monitor article. To others, the trade deficit is a critical problem that must be addressed. Peter Morici, University of Maryland economist, explained that unemployment is about 10 percent in the U.S. while China accounts for almost all of the trade deficit with the oil and consumer goods bought from them.

More on this topic

Washington Post


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