Wall Street began going crazy after a trade deficit increase was shown Wednesday by the Commerce Department for the month of June. $ 7.9 billion was how much in June the trade deficit widened. Stocks instantly went down. Last quarter the trade deficit had slowed more than analysts thought. The recession could go into a double-dip with the trade deficit so unstable.
Strong dollar spurs U.S. trade deficit in June
As outlined by the Commerce Department, this change within the deficit happened in June because those within the U.S. started buying cheaper exports from China, making the U.S. dollar stronger. $ 49.9 billion was where the gap went from $ 42.0 billion in May. It was expected that the gap would get smaller because oil prices are going down, reports the Washington Post. There were more purchases of consumer products and auto parts from out of the country in June raising imports from the $ 194.4 billion it was in May to $ 200.3 billion. $ 150.5 billion is where exports are now from the $ 152.4 they were before. U.S. companies struggled to sell products such as industrial supplies, food and consumer goods to foreign customers.
Predictions for trade deficit wrong
A Bloomberg News survey showed that June’s expected deficit was $ 42.1 billion as outlined by 73 economists. There was a 19 percent increase within the gap when it declined instead to $ 42.3 billion. Bloomberg reports that the June trade deficit adjusted for inflation, which is the figure used to calculate gross domestic product, increased to $ 54.1 billion, the highest since February 2008 during the worst of the financial crisis. This has caused economists to cut back their estimates from 1 to 1.5 percent in the second quarter.
More work needed on unemployment issues}
You will find many debates on whether a double-dip recession is happening within the future with all the numbers from June’s deficit. The Christian Science Monitor reports that when the unsustainable trade deficit is not good, it is not the locus of the bigger problem of U.S. unemployment. Before the recession, deficits were still here but weren’t noticed as much. We should focus on consumer demand and business investment to help the economy.
Could unemployment be happening because of the deficit
The Monitor article said some economists think bold efforts to fix the trade deficit could actually hurt economic recovery if they blunt the trend of expanding global commerce. To others, the trade deficit is a critical problem that must be addressed. In a written analysis, University of Maryland economist Peter Morici said oil and consumer goods from China account for nearly the entire trade deficit, and without a dramatic change in energy and trade policies, the U.S. economy faces unemployment around 10 percent indefinitely.
Further reading
Washington Post
washingtonpost.com/wp-dyn/content/article/2010/08/11/AR2010081103472_2.html?sid=ST2010081102399
