Wall Street went into a panic Wednesday as the Commerce Department reported a sharp increase in the U.S. trade deficit in June. After narrowing in recent months, the U.S. trade deficit unexpectedly widened in June by a record $ 7.9 billion. Stocks were sold off with this news. The trade deficit also led analysts to believe that U.S. economic recovery slowed more than they thought last quarter. Since the trade deficit won’t become sustainable, economists are more concerned about the recession going into a double-dip.
Trade deficit because of the dollar
The dollar became much stronger when those in the U.S. decided to start getting more exports from China because they are cheaper, reports the Commerce Department. The gap widened to $ 49.9 billion, up from a revised $ 42.0 billion in May. It was expected the gap would get smaller because oil prices have been going down, reports the Washington Post. Imports in June rose to $ 200.3 billion, from $ 194.4 billion in May, as U.S. shoppers bought more consumer products, auto parts and other goods from overseas. $ 150.5 billion is where exports are now from the $ 152.4 they were before. Industrial supplies, food and consumer goods weren’t sold out of the country as much that month.
Forecasts defied by trade deficit
A Bloomberg News survey showed that June’s expected deficit was $ 42.1 billion as outlined by 73 economists. Instead of a further decline from a $ 42.3 billion trade deficit in May, the gap increased 19 percent. According to Bloomberg, the number used to calculate gross domestic product, or trade deficit, when adjusted for inflation increased 54.1 billion since 2008 in February. This has caused economists to lower their estimates from 1 to 1.5 percent within the second quarter.
More troubles come from unemployment}
Economists still argue whether a double-dip recession is about to occur because of June’s deficit numbers. As outlined by the Christian Science Monitor, the trade deficit isn’t as much of a problem as U.S. unemployment rates. Nobody cared as much about the deficit in years past when unemployment wasn’t at all an issue. The more important issue is reviving domestic consumer demand and business investment.
Could unemployment be happening because of the deficit
The Monitor article said some economists think bold efforts to fix the trade deficit could really hurt economic recovery if they blunt the trend of expanding global commerce. Other economists think that the trade deficit problem has got to be worked on. China is responsible for almost the whole trade deficit considering all of the oil and consumer goods bought directly from them, and unemployment is bad enough as is at 10 percent within the U.S., as outlined by Peter Morici who’s an economist at the University of Maryland.
Washington Post
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