US trade gap widens, imports up: preview

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: The trade deficit in the US probably widened in September, reflecting increasing demand for foreign oil and automobiles as the economy grew, economists said before reports this week. The gap between imports and exports increased to $31.8 billion from $30.7 billion the prior month, according to the median of 60 estimates in a Bloomberg News survey ahead of the Commerce Department’s November 13 report. Labour Department data the same day may show the cost of goods from abroad rose in October for a third consecutive month.

Government stimulus has so far cushioned the world’s largest economy from the harm caused by mounting unemployment, enabling increases in consumer and business spending that are drawing in products from overseas. Exports may also grow as expanding economies in Asia and Europe and a weak dollar drive demand for American goods, giving manufacturing a lift. “The global economy is back on its feet,” said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd in New York. “US consumers are coming back and the trade deficit is starting to push back out.”

A government report two days ago showed unemployment in October rose to 10.2%, the highest level in 26 years. The number of jobs lost since the recession began in December 2007 climbed to 7.3 million. A collapse in world trade earlier this year brought the US gap down to $26 billion in May, its lowest level since November 1999, as imports plunged even faster than exports.

The federal “cash-for-clunkers” auto trade-in programme, which expired in late August, generated momentum in car sales and boosted demand for parts and supplies. Automakers are also beginning to rebuild inventories.

US sales for South Korea-based Hyundai Motor Co increased in September for the third month in a row, while Toyota Motor Corp is boosting production of models such as Corollas and Camry sedans to rebuild US inventory. “Our inventories are continuing to recover with a very good pipeline as we move into the fourth quarter,” Robert Carter, Toyota’s North America sales chief, said on a conference call last month.

First-time tax credits for homebuyers have also helped boost sales of homes, in turn bolstering demand for imported construction materials and appliances. The US economy expanded at a 3.5% annual rate in the third quarter, the best performance in two years. Economists surveyed last month forecast a 2.4% rate of growth this quarter and for 2010.