US trade deficit widens, manufacturing activity slows

WASHINGTON—The U.S. trade deficit widened in April, as demand for foreign cars, cellphones and other imported goods outpaced growth in U.S. exports.

The Commerce Department said Tuesday that the trade gap rose 8.5 per cent in April from March to US$40.3 billion.

Exports increased 1.2 per cent to US$187.4 billion, the second-highest level on record. Companies sold more telecommunications equipment, industrial machinery and airplane parts, while U.S.-made autos and auto parts also rose to an all-time high of US$12.8 billion.

But imports grew an even faster 2.4 per cent to US$227.7 billion. Sales of foreign cars increased to US$25.5 billion. Americans also bought more consumer goods, led by big gain in foreign-made cellphones.

The report showed a weaker global economy continues to reduce demand for U.S. exports. That’s likely to weigh on growth in the April-June quarter.

A wider trade gap can restrain growth because it means U.S. consumers and businesses are spending more on foreign goods than U.S. companies are taking in from overseas sales.

Europe’s recession continues to be a problem for U.S. companies. The deficit with the 27-nation European Union grew 25.6 per cent to US$12.4 billion. U.S. exports to the region declined 7.9 per cent, while imports from the region rose slightly.

The politically sensitive deficit with China surged to US$24.1 billion, the highest level since January and the largest with any single nation. Imports jumped 21 per cent, while exports fell 4.7 per cent. The March deficit had been artificially lowered by shipping disruptions caused by the Chinese New Year holiday.

The April deficit with South Korea climbed to a record US$2.4 billion. Imports from that country rose to an all-time high of US$5.6 billion.

Fewer exports have slowed activity at American factories, according to a measure of U.S. manufacturing released Monday.

The Institute for Supply Management said Monday that its index of manufacturing activity fell to 49 last month from 50.7 in April. It was the lowest reading since June 2009 and the first time the index had slipped below 50 since November. A reading under 50 indicates contraction in manufacturing.

A measure of export orders in the ISM report fell to its lowest level since January.

The weakness abroad has coincided with less investment in the U.S., as businesses have also held back, possibly out of concern that government spending cuts could hobble economic growth.

The U.S. economy grew at an annual rate of 2.4 per cent in the January-March quarter. Many economists think growth is slowing in the April-June quarter to an annual rate of around two per cent.

The deficit so far this year is running at an annual rate of US$491.9 billion, down eight per cent from the revised annual deficit of US$534.7 billion for 2012.