US trade gap increases to $47.24 bn in April

The US trade deficit rose sharply in April to the widest in two years as consumers bought record amounts of consumer goods, business equipment and automobiles from abroad, Bloomberg reported.

The gap increased by 6.9 per cent to $47.2 billion from the prior month's $44.2 billion, which came in higher than previously estimated, commerce department figures revealed today in Washington.

The April reading was higher than all estimates in a Bloomberg survey of 70 economists and was the biggest since April 2012. Exports held steady at earlier levels.

A rebound in US growth following a harsh winter is likely on gains in consumer spending and business investment that would bolster imports. Also slower expansion abroad would probably limit gains in exports, keeping the trade gap elevated.

Bloomberg quoted David Berson, chief economist at Nationwide Insurance in Columbus, Ohio as saying the US economy was expanding and imports were therefore rising.  He added, what was unexpected was that exports really did not move at all. He added, this was a sign of relative weakness abroad, particularly in Europe, and also China.

Meanwhile, US companies hired far fewer workers than expected last month, even as the  country's trade deficit hit its widest point in two years in April, suggesting trade continued to burden the economy, The Globe and Mail reported.

However, the data suggested the economy was on growth trajectory, with payroll growth still fairly robust and demand increasing. According to the ADP National Employment Report, private employers added 179,000 jobs to their payrolls in May as against 215,000 jobs in April and was below economists' expectations for a gain of 210,000 jobs in May.

The release came ahead of the government's comprehensive employment report on Friday.

Trade was down almost a percentage point from first-quarter gross domestic product, with the economy contracting by a 1.0 per cent annual pace in the first three months of the year.

Imports were up 1.2 per cent to an all-time high of $240.6-billion in April, while automobiles, capital goods, food and consumer goods imports stood at record highs in April.

According to commentators, the increase in capital goods could point to a pick-up in inventory accumulation by businesses, which could boost growth.