Weak dollar and oil demand shrink US trade gap - New US jobless claims rise unexpectedly

Weak dollar and oil demand shrink US trade gap - New US jobless claims rise unexpectedly
By Alan Rappeport in New York
Copyright The Financial Times Limited 2009
Published: December 10 2009 14:26 | Last updated: December 10 2009 15:30
http://www.ft.com/cms/s/0/7903840c-e58c-11de-81b4-00144feab49a.html


The weaker dollar and slumping demand for oil narrowed the US trade gap and signalled that the US economy could be growing faster than anticipated, commerce department figures showed on Thursday.

Separately on Thursday, labour department figures showed that new US jobless claims rose unexpectedly last week.

The trade deficit fell by 7.8 per cent to $32.9bn in October, surprising economists who were expecting the gap to widen. Both exports and imports rose to their highest levels in nearly a year, as trade volume picked up after collapsing during the worst of the global recession.

“In terms of the global economy, a situation where trade volumes are growing but the US deficit is stabilising is a much better environment than what was suffered through during the depths of the recession, when the US deficit narrowed sharply but global trade volume withered,” said Joshua Shapiro, chief US economist at MFR.

In the past year the US trade deficit with the rest of the world has plunged by 44.5 per cent. The sharp draw-down helped cushion the economy’s contraction and is now in a position to help boost growth.

During the third quarter of the year the US economy grew at an adjusted annual rate of 2.8 per cent. Economists at Capital Economics said that Thursday’s trade data along with Wednesday’s better-than-expected wholesale inventories figures suggested that the economy would expand by 3 per cent in the fourth quarter.

October exports rose by 2.6 per cent to $136.9bn on big jumps in demand for capital and consumer goods. Business and professional services saw modest increases during the month.

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“Exports are strong almost across the board, consistent with a decent pick-up in global trade and external demand in particular,” said Alan Ruskin, a strategist at RBS Securities.

Imports in October ticked up by 0.4 per cent to $169.7bn. The US imported more capital goods, consumer goods, cars and engines. Domestic demand fell for industrial supplies and materials.

The bilateral US trade gap with China, which is politically sensitive in the US, expanded to $22.7bn in October from $22.1bn the prior month. US deficits also grew with Japan and Canada, but narrowed with the European Union.

Meanwhile, new claims for unemployment benefits rose by 17,000 to 474,000 last week, defying projections that they would fall. However, the less volatile four-week average of claims fell to 475,750, the lowest level in a year.

The number of US workers continuing to claim unemployment benefits also declined, dropping from 5.46m to 5.16m.

Last week official figures showed that the US unemployment rate fell back to 10 per cent last month from a 26-year high of 10.2 per cent. Economists contend that jobless claims must fall to the 400,000-per-week level before the US economy can begin creating jobs.