U.S. trade deficit rose to $44.2B in August

The container ship MSC Emma heads up the

The container ship MSC Emma heads up the Delaware River towards the Port of Philadelphia. The U.S. trade deficit widened in August as exports fell to the lowest level in six months, a worrisome sign that a slowing global economy is cutting into demand for American goods. (Aug. 11, 2012) (Credit: AP)

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The U.S. trade deficit widened in August from July because exports fell to the lowest level in six months. The wider deficit likely dragged on already-weak economic growth.

The deficit grew 4.1 percent to $44.2 billion in August, the Commerce Department said Thursday.

Exports dropped 1 percent to $181.3 billion. Demand for American-made cars and farm goods declined.

Imports edged down a slight 0.1 percent to $225.5 billion. Purchases of foreign-made autos, aircraft and heavy machinery fell. The cost of oil imports rose sharply.

A wider trade deficit acts as a drag on growth. It typically means the U.S. is earning less on overseas sales of American-produced goods while spending more on foreign products.

Trade contributed to the tepid 1.3 percent annual growth rate in the April-June quarter. But Steven Wood, chief economist at Insight Economics, predicts that trade will not help economic growth in the July-September quarter and that the weaker exports could actually detract from it.

Most economists don't expect the economy to grow much more than 2 percent for the rest of the year.

The trade deficit is running at an annual rate of $561.6 billion, up slightly from last year's $559.9 billion imbalance.

American manufacturers have been hampered by slumping economies in Europe, China and other key export markets. Many European countries are in recession. The region accounts for about one-fifth of U.S. exports.

For August, the deficit with China dipped 2.3 percent to $28.7 billion. U.S. exports edged up modestly, while imports from China fell. For the year, the U.S. deficit is on track to surpass last year's record, the highest ever recorded with a single country.

The widening trade gap with China has heightened trade tensions between the two countries. And it has become a flash point in the presidential race.

The deficit with the European Union fell 2 percent in August to $11.7 billion.

Also, the deficit with Japan fell 1.4 percent in August to $6.7 billion. American exports to Japan rose to the highest level since March 1996.

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