US trade deficits narrowed down in April
The trade deficit in the US, the world’s largest economy, has narrowed down in the month of April. This has been the result of a rise in American exports as well as a fall in the US imports, in the aftermath of the severe natural disaster in Japan. According to the statistics provided by the US Commerce Department, total value of exports of good and services of the month of April was $175.5 billion, whereas the economy imported goods and services to the tune of $219.2 billion. This has resulted into a trade deficit of $43.7 billion for the month of April. This is the lowest figure since December 2010.
In recent months, a weaker dollar has made goods from the United States less expensive overseas, which led to the rise in exports. Prices of the exports items of the Unites have also increased due to rise in demand in the developing nations. The Department of Commerce has further added that rise in the exports of goods was reflected in the greater sales of industrial supplies and materials, capital goods and consumer goods. The fall in imports has been the result of a decline in the sales of vehicles, automobile parts, industrial supplies and materials.
Causes behind this narrowing down of trade deficits
The current trade data reflect the supply side disruptions emanating from the natural disaster in Japan. The rising crude oil prices, which even touched $103.18, have resulted in the increase in the commodity prices. In the month of April, on an average, the United States imported 8.41 million barrels of crude oil per day. This was the lowest imports of crude oil in the US since October 2010. In April, US imports from Japan, declined by $3 billion – this led to the fall in the US deficit with Japan to $3.5 billion.
Economists are of the opinion that domestic demand in the country is still weak. The increase in the exports of the US has offset the weakness in domestic demand in the country. Whatsoever, exports in the country account for around 9.6% of the gross domestic product in the country.
According to Kevin Logan, the chief United States economist for HSBC, the current reduction in deficit can be attributed to decline in oil imports. It is expected that the sharp decline in trade deficit in the month of April will take a U-turn as the impact of the earthquake in Japan will gradually fade away.
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