US trade deficit rises slightly in April

For the second month in a row, there has been a minor setback on the trade front, but hopefully it won't mark a return to the nation's reckless trade deficit condition of the previous five years.

The U.S. trade deficit increased 2.2 percent in April to $29.2 billion, as exports fell at a faster pace than imports, the U.S. Commerce Department announced Tuesday.

Economists surveyed by Bloomberg News had expected the trade deficit to total $28.5 billion in April. The March trade deficit was revised slightly higher to $28.5 billion from the previously released $27.6 billion. The trade deficit totaled $26.1 billion in February.

Imports continue to fall

In April, imports dipped 1.4 percent to a seasonally adjusted $150.3 billion -- the lowest level since September 2004. Exports, pushed lower by a large decline in capital goods and services, fell 2.3 percent to $121.1 billion, the lowest level since July 2006.

Among the export total, April saw a decline in demand for engines, machinery and metals. Among imports, Americans bought fewer toys and computer accessories, among other items.

Also, for the first four months of 2009, the trade deficit totaled $120.4 billion, a whopping 50 percent plunge from the $244.8 billion deficit for the same time period in 2008.

In addition, the U.S.'s trade deficit with China -- a major source of the U.S.'s gargantuan and problematic deficit during the recent economic expansion -- declined to $16.8 billion, compared to $20.3 billion in April 2008.

Stephen Gallagher, chief U.S. economist for Societe Generale in New York, said the U.S. economy needs to create or identify engines of growth for the next expansion. In his view, exports will not be one of them.

"We're certainly not looking for trade to be a leading component of the U.S. recovery,'' Gallagher told Bloomberg News Wednesday. "As the inventory situation improves, businesses will start importing a bit more, but that's a few months away. The rest of the world will, on average, be weak."

Economists prefer that a nation run a trade surplus as opposed to a trade deficit, as it usually implies that a nation's goods are competitive, its citizens are not consuming too much, and that it's amassing capital for future investment and economic goals.

Also in April, the average price of imported crude -- historically a major factor in the nation's trade deficit -- rose to $46.60 per barrel, from $41.36, the Commerce Department said.

Economic Analysis: Despite the second straight monthly uptick, the nation's trade deficit picture continues to improve, from a long-term perspective. Clearly, Americans are cutting back their consumer goods purchases, and it's reflected in the steadily declining import total. The hyper-consumption that characterized the leverage era was unsustainable and has ended, and the era of the 'frugal consumer' is well underway. What the nation must now do is pass a comprehensive energy policy to reduce its dependence first on imported oil, and then on oil, in general; that will keep more energy dollars at home, re-circulating in the American economy, aiding investment and helping to create domestic jobs, among other benefits.
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