I have a suspicion that things are about to get inflationary.
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Energy expanded U.S. trade gap in June
By Vikas Bajaj The New York Times
SATURDAY, AUGUST 13, 2005
NEW YORK High energy costs and rising imports of industrial goods drove the U.S. trade deficit up 6.1 percent in June, the government reported Friday, as oil prices set even bigger records this week.
Exports stayed virtually flat in June as the trade deficit climbed to $58.81 billion from $55.42 billion in May, the Commerce Department reported. This was higher than the $57.2 billion that economists had expected. The trade deficit was up 17.9 percent in the first six months of the year from the comparable period in 2004.
Economists said the trade deficit would probably widen even further in the second half of the year because oil prices have been scaling new heights and consumer demand is growing.
A rising trade deficit subtracts from gross domestic product, but that impact this time may be smaller than it has been in the past because the roaring housing market and improving labor market are driving the economy, said Joshua Shapiro, chief U.S. economist at MFR.
"In the third quarter, trade will resume its role as a weight on growth, but we are still likely to see a robust GDP picture," Shapiro said.
Rising oil prices appear to be having some effect on consumer sentiment, which fell in August, according to the University of Michigan's consumer confidence survey, which was released Friday. At 92.7, the survey's index of consumer sentiment was down from 96.5 in July.
Imports of crude oil and other petroleum-related products increased 7 percent, to $19.92 billion, in June, accounting for about half of the increase in the trade deficit. The average price for a barrel of oil and other energy imports rose to $44.40 after having dipped to $43.08 in May.
In July, the price of imported petroleum-related products rose 6.6 percent, according to a Labor Department report also released Friday.
Other factors that played into the trade deficit included rising imports of industrial supplies and materials, up $2.2 billion, which include oil and other petroleum products, and capital goods, up $1.2 billion, which were driven up by drilling and oil field equipment, airplanes, computers and telecommunications equipment.
Exports were little changed, with food, feeds and beverages falling slightly and capital goods up slightly. Sales of U.S. goods and services overseas should pick up as the world economy appears to be improving, Ted Weisman, an economist at Morgan Stanley, wrote in a research note. "We expect to see significantly better export results in coming months," he said.
The trade deficit with China grew 11.7 percent, to $17.59 billion, a record. The trade figures do not reflect any impact from China's decision last month to allow its currency, the yuan, to float in a narrow band against a basket of currencies.
U.S. trade groups and lawmakers in Washington had seized on the growing deficit with China and demanded that Beijing allow the yuan to appreciate against the dollar, so imports from China become more expensive and American exports become cheaper.
"We are hopeful that China's currency shift last month will lead to stronger action by October, when the next Treasury Department report on currency manipulation is due," Chi Nguyen, a economist at the National Association of Manufacturers in Washington, said. "If China continues to remove market-distorting constraints from its currency, we will begin to see long-standing trade distortions in U.S.-China trade begin to ease."
Since allowing the yuan to appreciate 2.1 percent in July and float in a 0.3 percent band daily, Chinese officials have tried to dampen speculation that they would allow a far greater appreciation of the currency.
NEW YORK High energy costs and rising imports of industrial goods drove the U.S. trade deficit up 6.1 percent in June, the government reported Friday, as oil prices set even bigger records this week.
Exports stayed virtually flat in June as the trade deficit climbed to $58.81 billion from $55.42 billion in May, the Commerce Department reported. This was higher than the $57.2 billion that economists had expected. The trade deficit was up 17.9 percent in the first six months of the year from the comparable period in 2004.
Economists said the trade deficit would probably widen even further in the second half of the year because oil prices have been scaling new heights and consumer demand is growing.
A rising trade deficit subtracts from gross domestic product, but that impact this time may be smaller than it has been in the past because the roaring housing market and improving labor market are driving the economy, said Joshua Shapiro, chief U.S. economist at MFR.
"In the third quarter, trade will resume its role as a weight on growth, but we are still likely to see a robust GDP picture," Shapiro said.
Rising oil prices appear to be having some effect on consumer sentiment, which fell in August, according to the University of Michigan's consumer confidence survey, which was released Friday. At 92.7, the survey's index of consumer sentiment was down from 96.5 in July.
Imports of crude oil and other petroleum-related products increased 7 percent, to $19.92 billion, in June, accounting for about half of the increase in the trade deficit. The average price for a barrel of oil and other energy imports rose to $44.40 after having dipped to $43.08 in May.
In July, the price of imported petroleum-related products rose 6.6 percent, according to a Labor Department report also released Friday.
Other factors that played into the trade deficit included rising imports of industrial supplies and materials, up $2.2 billion, which include oil and other petroleum products, and capital goods, up $1.2 billion, which were driven up by drilling and oil field equipment, airplanes, computers and telecommunications equipment.
Exports were little changed, with food, feeds and beverages falling slightly and capital goods up slightly. Sales of U.S. goods and services overseas should pick up as the world economy appears to be improving, Ted Weisman, an economist at Morgan Stanley, wrote in a research note. "We expect to see significantly better export results in coming months," he said.
The trade deficit with China grew 11.7 percent, to $17.59 billion, a record. The trade figures do not reflect any impact from China's decision last month to allow its currency, the yuan, to float in a narrow band against a basket of currencies.
U.S. trade groups and lawmakers in Washington had seized on the growing deficit with China and demanded that Beijing allow the yuan to appreciate against the dollar, so imports from China become more expensive and American exports become cheaper.
"We are hopeful that China's currency shift last month will lead to stronger action by October, when the next Treasury Department report on currency manipulation is due," Chi Nguyen, a economist at the National Association of Manufacturers in Washington, said. "If China continues to remove market-distorting constraints from its currency, we will begin to see long-standing trade distortions in U.S.-China trade begin to ease."
Since allowing the yuan to appreciate 2.1 percent in July and float in a 0.3 percent band daily, Chinese officials have tried to dampen speculation that they would allow a far greater appreciation of the currency.
NEW YORK High energy costs and rising imports of industrial goods drove the U.S. trade deficit up 6.1 percent in June, the government reported Friday, as oil prices set even bigger records this week.
Exports stayed virtually flat in June as the trade deficit climbed to $58.81 billion from $55.42 billion in May, the Commerce Department reported. This was higher than the $57.2 billion that economists had expected. The trade deficit was up 17.9 percent in the first six months of the year from the comparable period in 2004.
Economists said the trade deficit would probably widen even further in the second half of the year because oil prices have been scaling new heights and consumer demand is growing.
A rising trade deficit subtracts from gross domestic product, but that impact this time may be smaller than it has been in the past because the roaring housing market and improving labor market are driving the economy, said Joshua Shapiro, chief U.S. economist at MFR.
"In the third quarter, trade will resume its role as a weight on growth, but we are still likely to see a robust GDP picture," Shapiro said.
Rising oil prices appear to be having some effect on consumer sentiment, which fell in August, according to the University of Michigan's consumer confidence survey, which was released Friday. At 92.7, the survey's index of consumer sentiment was down from 96.5 in July.
Imports of crude oil and other petroleum-related products increased 7 percent, to $19.92 billion, in June, accounting for about half of the increase in the trade deficit. The average price for a barrel of oil and other energy imports rose to $44.40 after having dipped to $43.08 in May.
In July, the price of imported petroleum-related products rose 6.6 percent, according to a Labor Department report also released Friday.
Other factors that played into the trade deficit included rising imports of industrial supplies and materials, up $2.2 billion, which include oil and other petroleum products, and capital goods, up $1.2 billion, which were driven up by drilling and oil field equipment, airplanes, computers and telecommunications equipment.
Exports were little changed, with food, feeds and beverages falling slightly and capital goods up slightly. Sales of U.S. goods and services overseas should pick up as the world economy appears to be improving, Ted Weisman, an economist at Morgan Stanley, wrote in a research note. "We expect to see significantly better export results in coming months," he said.
The trade deficit with China grew 11.7 percent, to $17.59 billion, a record. The trade figures do not reflect any impact from China's decision last month to allow its currency, the yuan, to float in a narrow band against a basket of currencies.
U.S. trade groups and lawmakers in Washington had seized on the growing deficit with China and demanded that Beijing allow the yuan to appreciate against the dollar, so imports from China become more expensive and American exports become cheaper.
"We are hopeful that China's currency shift last month will lead to stronger action by October, when the next Treasury Department report on currency manipulation is due," Chi Nguyen, a economist at the National Association of Manufacturers in Washington, said. "If China continues to remove market-distorting constraints from its currency, we will begin to see long-standing trade distortions in U.S.-China trade begin to ease."
Since allowing the yuan to appreciate 2.1 percent in July and float in a 0.3 percent band daily, Chinese officials have tried to dampen speculation that they would allow a far greater appreciation of the currency.
NEW YORK High energy costs and rising imports of industrial goods drove the U.S. trade deficit up 6.1 percent in June, the government reported Friday, as oil prices set even bigger records this week.
Exports stayed virtually flat in June as the trade deficit climbed to $58.81 billion from $55.42 billion in May, the Commerce Department reported. This was higher than the $57.2 billion that economists had expected. The trade deficit was up 17.9 percent in the first six months of the year from the comparable period in 2004.
Economists said the trade deficit would probably widen even further in the second half of the year because oil prices have been scaling new heights and consumer demand is growing.
A rising trade deficit subtracts from gross domestic product, but that impact this time may be smaller than it has been in the past because the roaring housing market and improving labor market are driving the economy, said Joshua Shapiro, chief U.S. economist at MFR.
"In the third quarter, trade will resume its role as a weight on growth, but we are still likely to see a robust GDP picture," Shapiro said.
Rising oil prices appear to be having some effect on consumer sentiment, which fell in August, according to the University of Michigan's consumer confidence survey, which was released Friday. At 92.7, the survey's index of consumer sentiment was down from 96.5 in July.
Imports of crude oil and other petroleum-related products increased 7 percent, to $19.92 billion, in June, accounting for about half of the increase in the trade deficit. The average price for a barrel of oil and other energy imports rose to $44.40 after having dipped to $43.08 in May.
In July, the price of imported petroleum-related products rose 6.6 percent, according to a Labor Department report also released Friday.
Other factors that played into the trade deficit included rising imports of industrial supplies and materials, up $2.2 billion, which include oil and other petroleum products, and capital goods, up $1.2 billion, which were driven up by drilling and oil field equipment, airplanes, computers and telecommunications equipment.
Exports were little changed, with food, feeds and beverages falling slightly and capital goods up slightly. Sales of U.S. goods and services overseas should pick up as the world economy appears to be improving, Ted Weisman, an economist at Morgan Stanley, wrote in a research note. "We expect to see significantly better export results in coming months," he said.
The trade deficit with China grew 11.7 percent, to $17.59 billion, a record. The trade figures do not reflect any impact from China's decision last month to allow its currency, the yuan, to float in a narrow band against a basket of currencies.
U.S. trade groups and lawmakers in Washington had seized on the growing deficit with China and demanded that Beijing allow the yuan to appreciate against the dollar, so imports from China become more expensive and American exports become cheaper.
"We are hopeful that China's currency shift last month will lead to stronger action by October, when the next Treasury Department report on currency manipulation is due," Chi Nguyen, a economist at the National Association of Manufacturers in Washington, said. "If China continues to remove market-distorting constraints from its currency, we will begin to see long-standing trade distortions in U.S.-China trade begin to ease."
Since allowing the yuan to appreciate 2.1 percent in July and float in a 0.3 percent band daily, Chinese officials have tried to dampen speculation that they would allow a far greater appreciation of the currency.
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