The U.S. merchandise trade deficit widened unexpectedly in April to $10.49 billion, the worst performance in more than four years, as Americans’ demand for foreign oil and cars increased.
The Commerce Department said Thursday that the April deficit was up 0.3 percent, following an even larger 32 percent surge in March that had pushed the deficit that month to $10.45 billion.
The deficit with Japan jumped 4.4 percent to $5.5 billion, the worst showing with that country since October 1987.
The trade performance caught analysts by surprise. They had been forecasting that the trade gap would narrow significantly.
However, imports posted only a tiny decline in April, falling 1 percent to $48.87 billion. At the same time, U.S. exports fell 1.3 percent to $38.38 billion. The trade deficit is the difference between imports and exports.
“The trade number continues to get worse and the bad news is I am afraid that the administration is going to use this as an excuse to depreciate the dollar further against the yen,” said Jay Goldinger, an analyst at Capital Insight Inc., a Beverly Hills, Calif., investment firm.
Investors agreed with that assessment as the trade news prompted an immediate sell-off of dollars on foreign exchange markets. While a weaker dollar should help curb Americans’ appetite for Japanese products by making them more expensive, such a development runs the risk of increasing inflationary pressures in this country as well.
It also could cause foreign investors to pull their money out of this country, in search of greater returns elsewhere.
In other economic news Thursday, the Labor Department reported that productivity, the nation’s output per number of hours worked, declined by 1.6 percent during the first three months of the year, the first setback in two years.
Economists said the drop, which was far worse than originally estimated, raised doubts about whether recent productivity improvements signaled a fundamental change for the better in the economy or simply comprised a beneficial but temporary side effect of the recession.
So far this year, the trade deficit is running at an annual rate of $109.54 billion, far above last year’s $84.5 billion imbalance. Economists are forecasting that the deficit likely will remain at that level for the entire year and will be well above $100 billion next year as well.
