US trade deficit at 18-month high (not so good for Q2 GDP..but who really cares...)

BBC News
The US trade deficit widened to its highest level in 18 months in May, driven by demand for imported cars, computers and clothing.

The deficit increased by 4.8% to $42.3bn - the largest since November 2008, Commerce Department data showed.

The 2.9% rise in imports outpaced the 2.4% climb in exports.

US manufacturing has benefited from the global economic recovery, but some fear that problems in Europe will hurt sales in the future.

Debt troubles in the eurozone have also caused the value of the euro to weaken against the dollar this year - making US-made goods less competitive in the 16 nations using the euro.

May's deficit rise came despite oil imports dropping by 9.1% because of a lower oil price and lower volumes.

Sanctions
The deficit with China rose to $22.3bn, up 15.4% from April and the widest since October last year. Analysts say that this will add to pressure on the government to stand firm against China in trade disputes.

Last week, the US Treasury chose not to label Beijing a "currency manipulator" - a decision that undermines efforts by the US Congress to pass punitive trade sanctions.

Some US manufacturers believe the Chinese yuan is undervalued by as much as 40%.

Washington Post
By Timothy R. Homan
(c) 2010 Bloomberg News

Tuesday, July 13, 2010; 12:00 AM Estimates of 72 economists surveyed by Bloomberg ranged from deficits of $37 billion to $41.5 billion. The gap in April was $40.3 billion. The figures indicate trade subtracted from gross domestic product in the second quarter.

The deficit with China increased in May to the highest level since October, while imports from India were the most ever.

Exports from the U.S. to the rest of the world increased 2.4 percent to $152.3 billion, reflecting gains in industrial materials, business equipment and semiconductors. Imports rose 2.9 percent in May to $194.5 billion, led by an increase in demand for cars, pharmaceuticals, toys and clothing from abroad.

Today's report showed the trade gap with China rose to $22.3 billion from $19.3 billion in the prior month. While the U.S. exported 2.5 percent more to China in May, imports from the Asian nation surged 12 percent.

China, the world's biggest exporter, on July 10 reported that its overseas sales jumped 44 percent in June from a year earlier and the trade surplus more than doubled to $20 billion, the highest in eight months.

The surge in Chinese exports in June and the doubling of the trade surplus may prompt U.S. lawmakers to intensify pressure on China to step up the pace of yuan appreciation even as the outlook for overseas demand cools.

The balance adjusted for inflation, which is the figure used to calculate gross domestic product, increased to $46 billion in May. The gap was larger than the average $42.3 billion a month in the first quarter, putting trade on track to subtract from growth from April through June.

Grandpa: Trade deficit will subtract from GDP growth in Q2 however the Dow is currently up 135 points while the Standard and Poor's 500 is up 14. Yippee!! Slower growth makes the market go higher...who would have thunk? Since July 2, 2010, the Standard and Poor's 500 has launched 70 points (5 trading days plus 2 hours).