* Analysts trim Q2 GDP estimates on widening trade gap
* Rise in imports from China renews currency concerns
* Commerce Secretary Locke hails rise in US exports
(Recasts; adds analyst forecasts, quotes)
By Doug Palmer
WASHINGTON, July 13 The U.S. trade deficit
widened unexpectedly in May, prompting analysts to ratchet back
estimates for second quarter economic growth despite signs of
increased demand both at home and abroad.
The trade gap grew to $42.3 billion, the largest since
November 2008, as imports from China soared 12.1 percent,
helping overpower the best month for U.S. exports since
September 2008, the Commerce Department said on Tuesday.
A 2.9 percent rise in overall imports suggested U.S. demand
was holding up better than some had feared. But with more of
that demand being sated by overseas products, the widening
trade gap was seen weighing on U.S. gross domestic product.
RBS lowered its estimate of second quarter U.S. economic
growth to 2.8 percent, while JP Morgan cut its to 2.5 percent.
Both had previously forecast it at 3.2 percent.
Michelle Girard, a senior economist with RBS in Stamford,
Connecticut, said much of the merchandise imported in May was
ordered earlier in the spring, when optimism about the economy
was running high.
"With the pace of global recovery downshifting a bit this
summer, the strength in exports and imports could cool somewhat
heading into the fall," Girard said.
Data ranging from retail sales to consumer sentiment and
employment have suggested the U.S. economy's recovery from the
deepest recession since the 1930s has lost a step in recent
A second report on Tuesday showed U.S. small businesses
grew more pessimistic about their economic outlook in June in
the face of weak sales and political uncertainty.
However, financial markets largely ignored the data and
U.S. stocks rallied after Alcoa Inc (AA.N) reported
stronger-than-expected profit and raised its estimate for
global aluminum demand.
CHINA IMPORT SURGE
The big jump in imports from China is consistent with that
country's own trade data, which showed exports rising sharply
in May and June from year-ago levels.
That has given China's critics in the U.S. Congress new
ammunition to argue Beijing is not allowing its yuan currency
to increase in value fast enough. The yuan has risen 0.80
percent since Beijing loosened it from a peg to the dollar on
A number of U.S. lawmakers say it is undervalued by 25
percent to 40 percent, giving Chinese exporters an unfair
advantage. They are vowing to move forward with legislation,
after the Obama administration declined in a semi-annual report
last week to formally name China a currency manipulator.
However, the big jump in imports from China could be "a
temporary surge," as Chinese exporters rushed to ship goods
before the government cuts its export value-added tax rebate on
Thursday, Michael Feroli, an economist at JPMorgan said.
"To the extent Chinese exports have been front-loaded, this
could have modestly favorable 'payback' implications" for third
quarter U.S. economic growth, he said.
U.S. exports rose 2.4 percent in May. The increase
reflected big gains for industrial supplies and materials and
capital goods and smaller rises for autos and consumer goods.
"Today's numbers are another promising sign that the
worldwide economic rebound and a renewed focus on increasing
exports continues to boost the number of U.S. goods and
services sold overseas," Commerce Secretary Gary Locke said.
Locke also cheered the uptick in imports as a sign of
strengthening consumer demand, while calling it a reminder
"that more must be done to close the trade gap, including
fighting for a level playing field for U.S. businesses."
A slight drop in the average price for imported oil to
$76.93 per barrel helped keep the monthly trade gap from
widening further. U.S. imports from Saudi Arabia and other
members of the Organization of Petroleum Exporting Countries
were down about 10 percent in May.
(Editing by Andrew Hay)