Weak dollar propels US exports to high
By Eoin Callan in Washington
Published: August 14 2007 15:02 | Last updated: August 14 2007 21:16
Strong global growth is creating record demand for US exports and providing a critical support for the US economy at a time of heightened domestic risks, figures showed on Tuesday.
Wall Street economists lifted their estimates for US growth after a government report showed exports rose to an all-time high as the trade deficit narrowed unexpectedly to $58.1bn (?43bn, £29bn) in June from $59.2bn a month earlier.
Economists said faster growth in Asia, Europe and Latin America and a weaker dollar was increasing demand for US goods and helping to offset the housing downturn. The politically sensitive trade deficit with China rose.
Gary Bigg, an economist at Bank of America, said: ?The combination of a weaker trade value of the US dollar, solid global growth and moderating US demand is contributing to a growth-boosting improvement in trade.?
Separate figures showed inflation in the price of core wholesale goods also cooled last month.
The slowdown in producer prices reinforced calls from investors for the Federal Reserve chief Ben Bernanke to cut interest rates and help alleviate the credit crisis that has shaken financial markets in recent days.
Policymakers have maintained a hawkish stance on inflation despite mounting risks to growth from the collapse in the subprime mortgage market and an increase in the cost of borrowing for households and companies.
Economists said the strong performance of the US export sector had improved the US outlook.
Haseeb Ahmed, an economist at JPMorgan, said: ?The trend is clearly positive. The improvement in the trade balance provides a better starting point for the third quarter. Strong global growth conditions point to continued strength in exports in the second half of 2007.?
JPMorgan also raised its estimate for US economic growth in the last quarter to well above the 3.4 per cent initially estimated by the commerce department.
?A much narrower trade deficit than had been expected adds another 0.4 per cent to second-quarter GDP, taking [JPMorgan?s] forecast for economic growth to 4.4 per cent,? said Mr Ahmed.
Figures showed exports rose 1.5 per cent to $134.5bn in June, led by shipments of semiconductors and cars. The improvement in exports outpaced a rise in imports of 0.5 per cent to $192.7bn, the highest ever.
Nigel Gault, an economist at Global Insight, said: ?The economy remains vulnerable to the shock waves from the recent financial market turmoil but it is good to know that it was carrying more momentum than previously thought as the second quarter ended.?
Caterpillar, the manufacturer of heavy equipment, said recently that it was benefiting from overseas demand for earth-moving equipment in energy and mining sectors, which was offsetting tepid domestic demand for construction equipment.
But the company said that rising costs for inputs and raw materials such as aluminium and nickel were eroding profits.
The commerce department said core prices ? excluding volatile food and energy prices ? rose 0.1 per cent, the smallest gain in three months.
But overall producer prices were lifted by rising energy costs, and increased 0.6 per cent.
By Eoin Callan in Washington
Published: August 14 2007 15:02 | Last updated: August 14 2007 21:16
Strong global growth is creating record demand for US exports and providing a critical support for the US economy at a time of heightened domestic risks, figures showed on Tuesday.
Wall Street economists lifted their estimates for US growth after a government report showed exports rose to an all-time high as the trade deficit narrowed unexpectedly to $58.1bn (?43bn, £29bn) in June from $59.2bn a month earlier.
Economists said faster growth in Asia, Europe and Latin America and a weaker dollar was increasing demand for US goods and helping to offset the housing downturn. The politically sensitive trade deficit with China rose.
Gary Bigg, an economist at Bank of America, said: ?The combination of a weaker trade value of the US dollar, solid global growth and moderating US demand is contributing to a growth-boosting improvement in trade.?
Separate figures showed inflation in the price of core wholesale goods also cooled last month.
The slowdown in producer prices reinforced calls from investors for the Federal Reserve chief Ben Bernanke to cut interest rates and help alleviate the credit crisis that has shaken financial markets in recent days.
Policymakers have maintained a hawkish stance on inflation despite mounting risks to growth from the collapse in the subprime mortgage market and an increase in the cost of borrowing for households and companies.
Economists said the strong performance of the US export sector had improved the US outlook.
Haseeb Ahmed, an economist at JPMorgan, said: ?The trend is clearly positive. The improvement in the trade balance provides a better starting point for the third quarter. Strong global growth conditions point to continued strength in exports in the second half of 2007.?
JPMorgan also raised its estimate for US economic growth in the last quarter to well above the 3.4 per cent initially estimated by the commerce department.
?A much narrower trade deficit than had been expected adds another 0.4 per cent to second-quarter GDP, taking [JPMorgan?s] forecast for economic growth to 4.4 per cent,? said Mr Ahmed.
Figures showed exports rose 1.5 per cent to $134.5bn in June, led by shipments of semiconductors and cars. The improvement in exports outpaced a rise in imports of 0.5 per cent to $192.7bn, the highest ever.
Nigel Gault, an economist at Global Insight, said: ?The economy remains vulnerable to the shock waves from the recent financial market turmoil but it is good to know that it was carrying more momentum than previously thought as the second quarter ended.?
Caterpillar, the manufacturer of heavy equipment, said recently that it was benefiting from overseas demand for earth-moving equipment in energy and mining sectors, which was offsetting tepid domestic demand for construction equipment.
But the company said that rising costs for inputs and raw materials such as aluminium and nickel were eroding profits.
The commerce department said core prices ? excluding volatile food and energy prices ? rose 0.1 per cent, the smallest gain in three months.
But overall producer prices were lifted by rising energy costs, and increased 0.6 per cent.
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