The US trade deficit widened to a record in August on surging imports, and prices were subdued last month, indicating consumer spending is driving growth without stoking inflation.
Imports were the most in a year and a half as companies such as Circuit City Stores Inc and Liz Claiborne Inc boosted orders before a West Coast port shutdown. That pushed up the trade gap to US$38.5 billion from US$35.1 billion in July, the Commerce Department said. The consumer price index rose 0.2 percent in September, the Labor Department said.
"The US economy is growing, and it's growing faster than almost any country in the world except Canada, so it's not surprising that our trade deficit is widening,'' said Carl Weinberg, chief economist at High Frequency Economics Ltd in Valhalla, New York, a former adviser to the G7 and the OECD.
Imports are rising because consumer spending, which accounts for two-thirds of the economy and has sustained the recovery, is still growing. Competition from imported goods may keep inflation in check, some economists say.
Workers at 29 West Coast ports were ordered to return to their jobs Oct. 9 after President George W. Bush invoked the 1947 Taft-Hartley Act, not used since 1978, during the Carter administration. Bush said the 10-day lockout may have cost the economy US$10 billion.
July's trade deficit was wider than the US$34.6 billion reported a month ago. Economists had expected the August gap to widen to US$35.5 billion, based on the median of 57 forecasts in a Bloomberg News survey. The trade deficits with China and Mexico were the largest on record, the Commerce Department said.
The widening deficits over the past two months means that trade will be a larger drag on gross domestic product than previously expected. Ray Stone, an economist at Stone & McCarthy Research in Princeton, New Jersey, is scaling back third-quarter growth forecasts to 4.5 percent from about 5 percent based on Friday's trade report.
Stocks rose, sending the Standard & Poor's 500 Index and the Dow Jones Industrial Average to their largest weekly gains in more than a year. The S&P rose 5.19, or 0.6 percent, to close at 884.39. The Dow climbed 47.36, or 0.6 percent, to close at 8,322.40. Yields on the US Treasury's benchmark 4 3/8 percent note maturing in August 2012 fell 10 basis points to 4.1 percent. A basis point is 0.01 percentage point.
Imports rose 2 percent to US$120.3 billion for the month, led by a 4.2 increase for consumer goods such as clothing, household goods, furniture and televisions. Consumer goods imports totaled US$26.7 billion in August, the highest ever.
Rising imports helped insulate some companies from the port shutdown. Circuit City Stores, the No. 2 US electronics chain, increased its inventory purchases earlier this year because of the possibility of the work stoppage, the company said in a regulatory filing.
Liz Claiborne, the maker of Villager and Liz Claiborne clothing, said yesterday that it brought in merchandise in anticipation of the dock shutdown, including some by air. It said the shutdown had little effect in its third-quarter profit, and the extra costs of the shipments were built into earnings forecasts.
Department-store company JC Penney Co said it sped up shipment of about one-third of its holiday orders by two weeks, and the majority of its holiday items had arrived.
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