Trade deficit narrows as global demand slows

Fri Jun 8, 2012 1:34pm EDT
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By Doug Palmer

WASHINGTON (Reuters) - The trade deficit narrowed in April as slower growth in Europe and China bit into exports and the soft economy clipped import demand, a government report showed on Friday.

The trade gap shrank 4.9 percent to $50.1 billion, with exports falling 0.8 percent from last month's record level to $182.9 billion, the Commerce Department said.

Imports dropped 1.7 percent to $233.0 billion.

Both imports and exports were still the second-highest on record. But with Europe teetering on the edge of recession, some analysts saw trouble ahead for overseas sales, which have been a driver of economic growth.

"With the euro zone crisis set to rumble on for some time yet, exports to the euro zone are only likely to fall further," said Paul Dales, senior economist at Capital Economics in Toronto.

"The upshot is that net trade is unlikely to add much to GDP growth this year and may even subtract from it," he said.

However, revisions to earlier trade data suggested economic growth in the first quarter was stronger than previously estimated. UBS Securities said GDP growth would likely be revised up to a 2.3 percent annual rate from 1.9 percent.

Exports to the 27-nation European Union fell 11.1 percent in April to $22.3 billion, but for the first four months of 2012 were 3.5 percent above the same period last year. The EU was the United States' second-largest export market last year.   Continued...

A truck transports a container into a port of Miami, October 4, 2007. REUTERS/Carlos Barria