Us Trade Gap Seen Widening

The US trade gap probably moved deeper into the red in April after Marchs wave of gold and civilian aircraft exports receded, economists said.

There was an increase of $700 million in our gold exports and thats not going to continue, said Dana Johnson, managing director of research at First Chicago Capital Markets Inc. Also, you had very strong increases recently in aircraft shipments and were probably due for a little less strength there as well, Johnson continued.

The US trade deficit in goods and services, due at 1230 GMT today should have widened to $10.0 billion in April from $8.51 billion the previous month, based on the average forecast of an economists poll. Forecasters said both exports and imports were expected to have backed off in April, after rising the month before, although the decline in US sales abroad probably outpaced the rate at which domestic demand for foreign products fell.

 

In March, shipments of non-monetary gold rose $720 million to $1.09 billion, which, along with a hefty order book from Boeing Co, helped boost exports 4.1 per cent.

Exports of civilian aircraft rose to $2.464 billion in March, from $1.719 billion in February, according to the monthly Commerce Department report.

Orders for jets and other non-military aircraft can be volatile on a month-to-month basis, and even if plane sales slowed in April the overall trend is up, economists said. In general, this industry is still on the rise. Order backlogs are still big and rising, and Boeing has been experiencing pretty good business from Asia, said James Glassman, an economist at Chase Securities .Inc.

April exports may show strain from the weight of a solid US dollar during the month, economists said.

The dollars strength is probably going to be another factor that will have tended to slow exports during the month, said Alison Lynne Reaser, chief economist at Barnett Banks Inc. Reasers forecast for a $10 billion trade deficit reflects the consensus.

Combined with the dollars strength against the yen, the Japanese consumption tax imposed in the second quarter probably played a role in curbing Japans appetite for US exports, Reaser said.

May trade data from Japan, due on early on Wednesday, may shed light on US data, although with a slight lag, economists said.

Theyre expected to report ... a fairly sharp widening in their surplus, Glassman said. A lot of that takes a month or so before we see it in our numbers. Exports that are shipped here take a month or so on the shipment in.

The US gap with Japan widened to $4.608 billion in March from $4.255 billion in February.

With China, the deficit was expected to remain large and economists said an increase in April would not be a surprise.

The numbers with China showed a decline in the deficit to $2.589 billion in March from $3.336 billion previously.

Import-wise, economists said a slowdown in consumer spending and a build-up in inventories after US businesses ordered up to meet stronger demand last winter probably cut into foreign purchases in May.

Some of this is a lagged response to the strong consumer in the winter and some of it may be starting to feel the effects of the dollar, Glassman said.