Trade gap in U.S. narrowed in May as imports decreased

Capital Investment

There were some exceptions to the glum reading on imports. A $1.42 billion increase in imports of capital equipment like computers and telecommunications gear indicates business investment is holding up. Automobile and parts imports, which is a separate category from consumer goods, also climbed to a record.

Exports increased 0.2 percent to $183.1 billion, boosted by sales of food and capital equipment.

After eliminating the influence of prices, which are the numbers used to calculate gross domestic product, the trade gap narrowed to $48 billion from $48.7 billion. The average for the quarter so far was slightly higher than that for the first three months of the year, indicating trade will probably subtract a little bit from growth.

The trade gap with the European Union was the biggest since July 2008 as U.S. imports from the region jumped more than exports, perhaps starting to reflect the recent drop in the value of the euro. The deficit with South Korea was the biggest since November 2004.

China Gap

The deficit with China widened to $26 billion from $24.6 billion in April. Data this week indicated it may keep growing.

China’s total imports rose less than anticipated in June, pushing the trade surplus to a three-year high and adding pressure on the government to support demand as the global economy slows, a report yesterday showed. Inbound shipments increased 6.3 percent from a year earlier, compared with the 11 percent median estimate in a Bloomberg survey.

The trade deficit with China may remain a thorny issue as the U.S. presses it to allow its currency, the yuan, to rise against the dollar and improve access to its market. President Barack Obama this month expanded trade complaints against China, accusing the nation of imposing unfair taxes on American vehicles, mostly from General Motors Co. and Chrysler Group LLC.

Premier Wen Jiabao said promoting investment growth is the key now to stabilizing China’s economic expansion, signaling officials may boost spending to counter a slowdown that probably extended into a sixth quarter.

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