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Trade deficit takes dip
Question of the Day
he trade deficit dropped sharply in April as strong overseas demand pushed American exports to an all-time high.
While the Bush administration hailed the unexpectedly large improvement as a sign that an export boom was continuing, critics noted the imbalance with China rose in April, underscoring what they said was an urgent need for Congress to take action to punish China for unfair trade practices.
The Commerce Department reported yesterday that the gap between what America sells abroad and what it imports totaled $58.5 billion in April, a 6.2 percent decline from the March deficit.
Exports edged up 0.2 percent to a record $129.5 billion, reflecting strong sales of soybeans and other farm products, commercial aircraft and industrial machinery. Imports fell 1.9 percent to $188 billion, reflecting big declines in imports of foreign cars, televisions and clothing and a small dip in America’s foreign oil bill.
On Wall Street, the Dow Jones Industrial Average surged 157.66 points to close at 13,424.39, snapping a three-day losing streak and driven in part by interest-rate worries. It was the Dow’s biggest point gain in more than two months.
After briefly dipping into negative territory, stocks gained steam as yields on the 10-year Treasury note backed off five-year highs of 5.25 percent. As stocks closed yesterday, the yield on the benchmark note hovered around 5.11 percent.
The S&P; 500 Index advanced 16.95, or 1.14 percent, to 1,507.67. The Nasdaq Composite Index rose 32.16, or 1.27 percent, to 2,573.54. The Russell 2000 index of smaller companies rose 9.99, or 1.21 percent, to 835.31.
The overall improvement in the trade deficit was larger than had been expected and was a hopeful sign, analysts said, that the deficit for all of 2007 should narrow after posting records for five consecutive years.
They attributed the improvement to stronger growth overseas and the weaker value of the dollar against many currencies, which makes American products more competitive in overseas markets.
Trade subtracted a full percentage point from economic growth in the first three months of this year, when the economy slowed to a barely discernible 0.6 percent growth rate.
Analysts said the new trade report, which showed slightly improved deficit figures in previous months, will likely help boost economic growth as measured by the gross domestic product closer to 1 percent in the first quarter, while the big narrowing in the April deficit should help support a rebound in GDP growth to around 2.5 percent or better in the second quarter.
Through the first four months of this year, the deficit is running at an annual rate of $705.9 billion, a drop of 6.9 percent from last year’s record $758.5 billion imbalance.
However, the deficit with China widened to $19.4 billion in April, the worst showing since January, and through the first four months of the year is running 11.9 percent higher than the pace of a year ago when the gap with China set a record at $232.6 billion.
The deficit with China has gotten increasing attention in Congress, where critics are pushing various bills that would impose economic sanctions to punish China for what they contend are unfair trading practices such as currency manipulation and copyright piracy.
By Michael Widlanski
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