US demand for overseas products may dip

By Timothy R. Homan (China Daily)
Updated: 2010-09-06 08:05
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WASHINGTON - The trade deficit probably narrowed in July as a slowing economy prompted Americans to buy fewer goods from abroad, economists said before a government report this week.

The gap between imports and exports decreased to $47 billion from $49.9 billion the prior month, according to the median of 60 estimates in a Bloomberg News survey ahead of the Commerce Department's Sept 9 report. The deficit swelled by a record $7.9 billion in June.

Demand for overseas products may cool as American consumers and businesses curb spending in coming months, while growing foreign economies mean companies like Caterpillar Inc. will see sales climb. Exports will probably be a source of strength for manufacturing as the world's largest economy tries to sustain a recovery from the worst recession since the 1930s.

"Given the underlying sluggishness in domestic demand, there's no fundamental support for such high import levels," said Brian Bethune, chief US financial economist at IHS Global Insight in Lexington, Massachusetts. "We expect to see exports bounce higher and imports begin to decline."

The trade deficit in June widened as imports jumped and shipments abroad declined, the Commerce Department said last month. The overall gap was the widest since October 2008.

Stocks rallied and Treasuries slumped last week after reports on employment and manufacturing alleviated concerns the US was slipping back into a recession. The Standard & Poor's 500 gained 3.7 percent, the best single-week performance in almost two months.

The Labor Department on Sept 3 said private payrolls that exclude government agencies climbed 67,000 in August, after a revised 107,000 gain a month earlier that was larger than initially estimated. The unemployment rate rose to 9.6 percent as more people looked for work.

Peoria, Illinois-based Caterpillar, the world's largest construction equipment maker, said last month it may add as many as 9,000 workers worldwide this year as sales climb in developing markets. About 1,250 of the jobs the company has added so far this year have been in the US.

Manufacturing unexpectedly expanded at a faster pace in August as production picked up, a report from the Institute for Supply Management showed last week. At the same time, the group's services index fell in August to the lowest level in seven months.

"What I see is an uneven recovery," Bob McDonald, chief executive officer of Procter & Gamble Co, the world's largest household-products maker, said in a Sept 3 interview with Bloomberg Television. "What I see when I look at our consumer data is the US economy is improving, the global economy is improving, and what we'd like to do is accelerate the rate of growth."

Public opinion polls show jobs and the economy are top concerns among voters two months before November congressional elections in which the Democrats are at risk of losing their majorities in the House of Representatives and the Senate.

President Barack Obama's approval ratings have slipped and support for the Republican Party has grown amid signs the economy was cooling.

Bloomberg News