Sun, Jun 11, 2006 - Page 11 News List

US trade deficit expands in April to US$63.4 billion


The US trade deficit expanded afresh in April, worsening to US$63.4 billion as imports of oil and cheap goods from China rose, the government said on Friday.

The US trade performance was better than expected by economists, who had predicted an April figure of US$65.0 billion. The March deficit came to a revised US$61.9 billion.

The rise came after two consecutive months of falls, and left the deficit at its highest level since the start of the year.

April imports rose US$1.3 billion from March to US$177.8 billion, while exports fell US$0.3 billion to US$115.9 billion, the Commerce Department said.

The deterioration was largely due to a US$1.44-billion increase in the US bill for imported oil, which rose to US$23.8 billion during a month when crude prices hit new records over US$75 dollars a barrel.

US Trade Representative Susan Schwab said sky-high US deficits were "not sustainable" in the long run, but noted the major share taken by the petroleum bill.

US exports were up nearly 12 percent in the first quarter, which she said was "a pretty darn good picture."

The deficit with China widened 9.0 percent to US$17.0 billion as the US economy sucked in more imports of apparel, toys and household electronics.

The US trade gap with Canada, a major oil exporter, jumped 15 percent to US$6.1 billion, and with Japan it rose 2.6 percent to US$7.8 billion. But the US deficit with the EU shrank 7.0 percent to US$9.4 billion.

"Surging sales of Chinese consumer goods are pushing up the trade deficit," University of Maryland business professor Peter Morici said.

"The trade deficit, along with higher gasoline prices and the flagging housing sector, will slow GDP growth in the second and third quarters," he said.

"All of this makes more difficult the challenges faced by Fed [Federal Reserve] chairman Ben Bernanke," Morici added.

The US central bank faces a delicate challenge in keeping a lid on inflationary pressures without choking off economic growth, which Bernanke says will slow later this year.

Analysts are divided about whether the Fed will raise US interest rates for a 17th time running when it meets on June 28 and June 29, although recent tough talk from Bernanke on inflation has raised the odds on a hike.

Other data released on Friday could give the Fed grounds for concern. The Labor Department said the prices of products imported into the US rose on average by 1.6 percent last month.

Over both April and last month, import prices have risen at their strongest pace since October 1990. Over the past 12 months, they are up 8.3 percent.

Oil import prices alone have rocketed 45.7 percent over the 12-month period, the Labor Department said.

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