July 12, 2011 / 3:45 PM / 9 years ago

WRAPUP 2-U.S. trade gap surges to nearly 3-year high on oil

 * US trade gap swells to highest since October 2008
 * May oil import prices jump to highest since August 2008
 * U.S. imports, exports both second highest on record
 (Adds analyst comments, other detail)
 By Doug Palmer
 WASHINGTON, July 12 (Reuters) - The U.S. trade gap widened
sharply in May to its highest level in nearly three years as
surging oil prices helped push imports to a near record and
exports fell slightly from April's all-time high.
 The trade deficit totaled $50.2 billion, the highest since
October 2008, and well above the consensus estimate of $44
billion from Wall Street analysts surveyed before the report, a
Commerce Department report showed on Tuesday.
 Despite the bigger-than-expected deficit, the high levels
of exports and a pick-up of capital good imports show the
struggling U.S. economy still has some signs of life.
 "It still looks like foreign trade will make a positive
contribution to second quarter growth, but ... maybe a half
percentage point less positive. That's the bottom line --
another disappointing data point for the quarter," said Ken
Mayland, president of Clearview Economics.
 Imports rose 2.6 percent to $225.1 billion, the highest
since the record of $231.6 billion set in July 2008 just before
the global financial crisis took a huge toll on global trade.
 The increase reflected record imports of businesses
investing in machinery and equipment, and food, feeds and
beverages in a sign of resurgent U.S. demand.
 "The best news in the report from a future growth
perspective is the 36.1 percent annualized growth in capital
goods imports in real terms, which corroborates the stronger
capital goods orders data in the durable goods report," said
John Ryding and Conrad DeQuadros at RDQ Economics.
 "If the economy was headed to a true double-dip, we doubt
companies would be boosting their investment spending in this
way," the analysts said.
 The oil price rise helped push the U.S. petroleum trade
deficit to the highest since October 2008. Imports from the
Organization of the Petroleum Exporting Countries were also the
highest since October 2008.
 Oil prices declined in June and came under additional
pressure when the International Energy Agency announced on June
23 a coordinated release of 60 million barrels from emergency
reserves. But prices have since rebounded.
 INSTANT VIEW-US trade deficit [ID:nN1E76B089]
 Graphic - trade balance: r.reuters.com/caf62s
 Exports put in another strong showing, but slipped 0.5
percent from the April record to $174.9 billion as shipments to
the European Union, China and newly industrialized countries
all fell. Exports of capital goods were the highest on record.
 Weakness in the euro zone stemming Greece's debt crisis was
seen as another threat to the U.S. economic recovery.
 U.S. stocks were slightly lower on Tuesday on worries about
the euro zone, while U.S. Treasuries rose.
 President Barack Obama in 2010 set a goal of doubling
exports in five years to help fuel economic growth and bring
down the U.S. unemployment rate, which is at 9.2 percent.
 But a standoff with Republicans over a retraining program
for workers displaced by trade has clouded prospects for
congressional action on trade deals with South Korea, Colombia
and Panama the White House hopes will boost exports.
 The trade disputes in Congress and other economic problems
caused small and medium-sized companies to be increasingly glum
about a pickup in U.S. growth over the next year, according to
a quarterly survey published on Tuesday by Vistage
International, which represents small businesses.
 The politically sensitive trade gap with China jumped more
than 15 percent to $25 billion. U.S. companies imported $32.8
billion of goods and services from the Asian powerhouse during
May, but exported just $7.8 billion worth to that country.
 In worrisome sign for U.S. exports to China in June, recent
data out of Beijing shows the country's imports that month were
the weakest in 20 months.
 The wider trade gap with China could propel efforts in
Congress to pass legislation aimed at pressuring Beijing to
raise the value of its yuan currency, which critics charge is
artificially weak against the dollar and gives Chinese
exporters an unfair advantage.
 "China's exchange rate manipulation, industrial subsidies,
state-owned enterprises, and weak regulations set the stage for
this mess," Scott Paul, executive director of the Alliance for
American Manufacturing said, referring to huge trade gap.
 "But our government's refusal to stop China's cheating has
made it worse," Paul said.
 (Editing by Andrea Ricci and Neil Stempleman)

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