Wall Street went into a panic Wednesday as the Commerce Department reported a sharp increase in the U.S. trade deficit in June. $ 7.9 billion was how much in June the trade deficit widened. Stocks right away went down. The trade deficit also led analysts to believe that U.S. economic recovery slowed more than they thought last quarter. The recession could go into a double-dip with the trade deficit so unstable.
June U.S. trade deficit caused by strong dollar
The dollar became much stronger when those within the U.S. decided to start buying more exports from China because they are cheaper, reports the Commerce Department. $ 49.9 billion was where the gap went from $ 42.0 billion in May. The Washington Post reports that economists had been expecting a smaller gap after a recent drop in oil prices. In May imports were at $ 194.4 billion. They then rose to $ 200.3 billion in June while more consumer products, auto parts and other things were being bought out of the country. Exports then went down from $ 152.4 billion to $ 150.5 billion. Industrial supplies, food and consumer goods weren’t sold out of the country as much that month.
Predictions for trade deficit wrong
73 economists predicted in a Bloomberg News Survey that $ 42.1 billion was going to be the trade deficit. There was a 19 percent increase within the gap when it declined instead to $ 42.3 billion. According to Bloomberg, the number used to calculate gross domestic product, or trade deficit, when adjusted for inflation increased 54.1 billion since 2008 in February. The disappointing numbers prompted some economists to reduce estimates for second-quarter growth to around 1 percent to 1.5 percent.
Unemployment a bigger issue}
Economists still argue whether a double-dip recession is about to occur because of June’s deficit numbers. U.S. unemployment rates should be more of the focus instead of the trade deficit reports the Christian Science Monitor. Trade deficits coexisted with domestic job growth for years prior to the recession. We should focus on consumer demand and business investment to help the economy.
Numerous still think unemployment would decrease with better trade deficits
The Monitor article said some economists think bold efforts to fix the trade deficit could really hurt economic recovery if they blunt the trend of expanding global commerce. Other economists think the trade deficit problem has got to be worked on. Peter Morici, University of Maryland economist, explained that unemployment is about 10 percent in the U.S. while China accounts for almost all of the trade deficit with the oil and consumer goods bought from them.
Washington Post
washingtonpost.com/wp-dyn/content/article/2010/08/11/AR2010081103472_2.html?sid=ST2010081102399
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