US trade gap shrinks on fall in car imports from Japan

THE US trade gap shrank unexpectedly to $43.68 billion as exports hit a new record, which assuaged some concerns over weakening second-quarter economic growth.

The data released yesterday reflected a plunge in auto imports following the Japan earthquake in March, combined with record levels of exports, while the petroleum trade balance was the narrowest for the year.

The improvement, led by sectors experiencing temporary exceptional circumstances, looks unlikely to be sustained for long, said David Sloan of IFR Economics. “However this data should restrain what had previously been growing pessimism on Q2 GDP, and keep forecasts for the quarter comfortably above 2 per cent.”

Investors reacted positively to the data, with SP 500 futures rising 0.4 per cent to 1,282.20. This follows six straight days of losses on the index in what was its longest losing streak since February 2009.

“The narrowing in the trade balance comes primarily from capital goods – with declining automotive and civilian plane imports,” said David Semmens, US economist at Standard Chartered. “Interestingly, despite April showing the pinnacle of oil prices, we see the petroleum trade balance at the narrowest in 2011.”

Separately, initial jobless claims increased to 427,000 for the week ending June 4th, the US labour department said. Wall Street analysts expected initial claims to fall to 419,000 after last week’s revised figure of 426,000. The data follow poor claims last week and bad non-farm payrolls figures, adding to labour market fears.

“The weaker-than-expected initial jobless claims data are not severe enough to really shake the market from its current belief that the slowdown in the US should be transitory,” Mr Semmens said.

The May non-farm payrolls showed that the US added just 54,000 jobs, falling well below Wall Street expectations and heightening concerns that the economy had stalled.

Recent weak data, including housing and consumer confidence reports, have caused economists to worry that the US may experience a double-dip recession, erasing the gains made since the financial crisis.

Comments by Ben Bernanke, Federal Reserve chairman, this week acknowledged the US economy had slowed but did not suggest that the US central bank would consider further stimulus beyond the current QE2 programme. – (Copyright The Financial Times Limited 2011)