BRIDGE SURVEY: US Nov trade gap seen widening slightly
By Cornelius Luca, Bridge News
New York--Jan 18--The US trade deficit in goods and services is
expected to widen marginally to a new record of $26.0 billion in November
from October's unadjusted $25.9 billion as the ongoing US consumption for
imports remained vigorous going into the end of the century, analysts
said. Although split on the impact of the trade gap on the US growth, they
agreed that fourth quarter GDP will be robust.
* * *
The government is expected to report on Thursday that the trade
deficit in goods and services widened to a record $26.0 billion from
October's unrevised $25.9 billion, with estimates ranging from $21.7
billion to $26.6 billion, according to a Bridge News survey of economists.
news.bridge.com
While diverging on whether the trade data will subtract or add to
growth, economists concurred that the fourth quarter GDP will be strong
enough to justify a rate hike in February. Analysts surveyed by Bridge
predicted a 5.2% rate for the fourth quarter. The preliminary fourth
quarter GDP estimate will be released on Jan 28.
Going into the holiday season, the US appetite for imports remained
strong.
Along with the rising petroleum prices, the domestic demand was credited
with most of the increase in imports. What's new in November data is the
expectation for an improvement in the overseas markets. Should
international demand pick-up, analysts are confident that the US exports
might see better day ahead.
"We are looking for another quarter of consumption-driven trade
deficit, with pre-Y2K demand seen throughout the period, and higher oil
prices on the month," said Henry Willmore, director at Barclays, who is
looking for a trade gap of $26 billion. Such a figure would trim growth by
about 0.5 of a percentage point.
David Greenlaw, chief US fixed income economist at Morgan Stanley, and
Goldman Sachs economist John Youngdahl expect the trade gap to widen to
$26.5 billion in November.
"The rise in shipping containers on the import side should exceed the
increase in exports from automobiles, high tech products and aircraft
orders," said Greenlaw. Although he sees the data trimming the
fourth-quarter growth rate, Greenlaw still expects the US economy to have
expanded by a hefty 6.0% in the fourth quarter.
"Such growth amplifies the odds that the Fed will hike rate by 25
basis points in February, with additional tightening warranted," added
Greenlaw.
Paribas Capital Markets economist Eric Green thinks the trade deficit
will improve just a notch from October to $25.7 billion as exports started
to make some inroads.
"Exports gained due to the soaring factory shipments, although imports
nailed a steep 2% increase; the data should support the GDP to an
approximately 4.5% growth on the quarter," said Green.
In the same vein, Bank One Capital Markets Ku Shin, director of Asia
Analysis, sees the trade gap narrowing to $25.2 billion, as "imports will
rise by a mere 0.1%, while exports, buoyed by growth abroad, will advance
by 1.1% in November."
Shin based part of his forecast on a shrinking Japanese surplus with
the US due to a strengthening of the yen in the fall of 1999. But in
October, the trade gap with the Pacific Rim countries widened on a
seasonally non-adjusted basis to $18.191 billion from $17.759 billion in
September. US trade gap with China and Japan hit fresh records of $7.152
billion from a $6.9 02 billion, and $7.179 from $6.638, while the gap with
the Asian newly industrialized countries narrowed slightly to $2.235
billion from $2.288 billion.
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"Only China will maintain its surplus with the US due to lack of
currency fluctuation and weak Chinese demand for US products," added Shin.
Martin Mauro, manager, US financial economics at Merrill Lynch and
Josh Feinman, chief economist at Deutsche Asset Management Americas,
expect a narrowing of the gap to $25 billion.
"The decline in customs duties and in the NAPM imports data net up the
rise in petroleum prices, so imports should be about flat," said Mauro.
Feiman, who bases his analysis on the economic pickup abroad, is
concerned over the possible effect of the seasonal factor in the fourth
quarter that artificially narrows the gap, just to widen i t back in the
first quarter.
"To be on the safe side, the trade data of the fourth and first
quarters should be averaged," said Feinman.
In terms of impact on the GDP, Feinman thinks that a figure around
$25-26 billion should leave his 5.0% forecast intact.
Looking into the trade direction in 2000, Mauro is forecasting a
narrowing of the gap to narrow as the rest of the world picks up
economically. Echoing Mauro's analysis, Green sees exports growing faster
than imports "as we are going deeper into 2000, after the trade deficit
will plateau in the second half of the year."
The trade gaps with the euro zone countries expanded to $3.728 billion
from $2.744 billion, but narrowed with Canada and Mexico and to $4.608
billion from $4.935 billion, respectively.
Following is a sampling of forecasts:
November 1999 trade gap
Deutsche Asset Management Americas $25.0 bln
Merrill Lynch $25.0 bln
Banc One Capital Markets $25.2 bln
Donaldson, Lufkin & Jenrette Securities Corp. $25.5 bln
Paribas Capital Markets $25.7 bln
Barclays $26.0 bln
Goldman Sachs $26.5 bln
Morgan Stanley $26.5 bln
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