U.S. Trade deficit climbs to 15-month high in March A trade deficit is when the total value of imports is greater than the total value of exports, a surplus is when the total value of exports exceeds the total value of imports.
The higher deficit is evidence of an improving economy. It shows demand is picking up in the United States following the recession, which had cut the trade gap last year to the lowest level in eight years
So far so good on Greek bailout, but dark legacy of recession becoming clearer former Bank of Canada governor David Dodge, warned that the crisis should be considered a “wake-up call” to other countries, including the United States and the United Kingdom, to get their fiscal houses in order.
U.S. Bank Regulations Miss the Point
• TSX +195.47 Europe’s trillion-dollar debt solution held for a second day as global shares rose after Spain outlined measures to cut its deficit, allaying fears about Greek debt crisis contagion.
• DOW +148.65
• Dollar +.19c to 98.06cUS climbed for a fourth straight session, boosted by rallying equities and easing fears that sovereign debt problems could spread in the euro zone.
• Oil -.72 to $75.65US per barrel. dropped after government data showed rising U.S. inventories.
• Gold +$22.80 to $1,242.70 USD per ounce Safe-haven buying pushed gold prices to another new record high as traders pondered if the $1-trillion U.S. loan package would suffice to ensure long-term financial stability in the euro-zone.
• http://www.financialpost.com/markets/market-data/money-yields-can_us.html?tmp=yields-can_us
So far so good on Greek bailout, but dark legacy of recession becoming clearer
BY JULIAN BELTRAME
OTTAWA — Europe’s trillion-dollar debt solution held for a second day Tuesday as global stock markets and currencies headed back nearer to levels they enjoyed prior to last week’s steep selloff.
The Toronto market was up after big rebounds on Monday. Meanwhile, the Canadian dollar rose past 98 cents US, a signal that markets judged that global risk was diminishing.
But it appeared that investors as well as governments were keeping their fingers crossed, given the growing realization that the eurozone rescue package hammered out on the weekend may only delay the day of financial reckoning. Gold, a traditional safe haven destination for nervous money, rose to a record high close.
The New York Times quoted a prominent equity analyst as describing the mood on Wall Street as a “wall of worry” over sovereign debt, China and other uncertainties.
The market monitoring group of the Institute of International Finance, co-chaired by former Bank of Canada governor David Dodge, warned that the crisis should be considered a “wake-up call” to other countries, including the United States and the United Kingdom, to get their fiscal houses in order.
In the short term, the backstop agreement did appear to assure holders of Greek treasury bonds they will get their money on maturity next week, and gave the country a window to make some additional borrowings at non-crippling rates.
But what happens next? And what might happen to the $1-trillion in pledged support if the rest of the so-called PIIGS (Portugal, Italy, Ireland, Spain and Greece) need help to finance their debt.
“We fear that as the market gives this announcement . . . more than a few hours of scrutiny and assessment, the day after the day after may not play out as nicely as the day before it,” said Carl Weinberg of U.S.-based High Frequency Economics.
Although North America’s exposure is indirect, even Canada stands to lose from the fallout.
The TD Bank’s deputy chief economist, Craig Alexander, says Canada’s economy would take a significant hit — just like it did in 2008 — if government debt worries lead to a second financial market crisis. Even if the problem is somewhat contained, Canadian economic growth will be slowed by Europe’s debt problems, he said.
A slowdown in the European economy — the world’s biggest — would cut demand for Canadian exports to Europe of everything from machinery and manufactured goods to food products, grain, fertilizers and chemicals. But Europe represents only about 10 per cent of Canadian exports, so the impact would be relatively minor.
A debt default would also cause financial losses to any Canadian bank or companies holding European bonds, but again the exposure appears to be minor.
The real danger, says Alexander, is if a debt default or debt restructuring leads to the failure of one or more major European banks, it could cause a knock-on effect that causes international credit markets to seize up as occurred in the fall of 2008 following the collapse of Lehman Brothers.
“We saw the real impact of that. You saw export financing dry up and exports shipments plunge globally. That’s the worst case scenario for Canada,” he said.
Given that about one third of Canada’s economy is based on exports, the country fell into a recession lasting almost a year with the loss of over 400,000 jobs as a result of the recession after the Lehman collapse.
Even under the best case scenario — that European countries and the United States manage to put in place the austerity measures needed to assure markets their debts can be managed — the result would be slower global growth, which would still affect Canada’s export sector to some degree.
By one calculation, modest austerity measures in Europe would slice about one per cent of gross domestic product from the continent’s already weak growth prospects, with some Mediterranean countries plunged back into recession.
The irony is that Canada would also suffer even though it has done most things right, says David Rosenberg, chief economist with Toronto-based Gluskin Sheff. “Being a small, open economy sensitive to commodity prices, this is one of the many times when sudden shifts in global economic sentiment can hit us disproportionately,” he said.
Alexander still believes a double-dip recession remains an outside risk, but adds it can no longer be dismissed as easily as it was a few months ago.
Canada’s economy grew by a surprisingly strong five per cent in the last three months of 2009, and judging by the 109,000 new jobs added in April, it is still advancing strongly. But now it is expected to slow considerably in the second half of the year.
“The good news is we got out of the recession; the bad news is we have the legacy of late 2008-2009 to deal with and those legacies are enormous,” Alexander said.“I’m worried (that) if the U.S. economy slows down and the global economy moderates, once again the export sector is challenged, and we’re going go through this at the same time the dollar is strong. I think the expectations for strong economic growth going forward needs to be tempered.”
For Europe, the repercussions from letting government debt cross over to the unmanageable column could restrain growth for a decade, he said. http://news.therecord.com/Business/article/710277 SPECIAL FEATURES
U.S. Trade deficit climbs to 15-month high in March
BY MARTIN CRUTSINGER The Associated Press
WASHINGTON — The U.S. trade deficit rose to a 15-month high as rising oil prices pushed crude oil imports to the highest level since the fall of 2008, offsetting another strong gain in exports. The larger deficit is evidence of a rebounding U.S. economy.
The Commerce Department said Wednesday that the trade deficit rose 2.5 per cent to $40.4 billion in March. It was close to the $40.1 billion deficit economists had expected and the biggest monthly trade deficit since December 2008.
Exports of goods and services rose 3.2 per cent to $147.87 billion, the highest level since October 2008. Imports were up 3.1 per cent to $188.3 billion.
The higher deficit is evidence of an improving economy. It shows demand is picking up in the United States following the recession, which had cut the trade gap last year to the lowest level in eight years.
Economists believe U.S. manufacturers will continue to get a boost from rising demand for their products, reflecting the rebound in the global economy and a weaker dollar against many major currencies. However, that forecast could turn out to be too optimistic if a widening European debt crisis cuts into demand for American products in Europe, a major market for U.S. goods.
So far this year, the deficit is running at an annual rate of $467.2 billion, 23.4 per cent higher than last year’s imbalance of $378.6 billion.
For March, the rise in exports reflected increased sales of American farm products and a wide range of heavy machinery from electric generators to earthmoving equipment.
The increase in imports was led by a 25.5 per cent jump in crude oil shipments, which rose to $22.3 billion March, the highest level since October 2008. That increase reflected higher volume and higher prices. The average price for a barrel of crude oil rose to $74.32, up from $72.92 in February.
Prices have been falling since oil hit $87.15 a barrel in early May. The debt crisis in Europe has raised concerns about the durability of the global economic recovery. In trading Wednesday, oil dipped to near $76 per barrel.
The deficit with China rose 2.4 per cent to $16.9 billion in March, the highest level since January and the largest trade gap with any country. The Obama administration is facing growing political pressure to impose trade sanctions on China if Beijing doesn’t allow its currency to rise in value against the dollar.
Treasury Secretary Timothy Geithner raised hopes for a change in monetary policy when he stopped in Beijing last month to talk with Chinese economic officials on his way back from India. But Chinese President Hu Jintao, who discussed the issue with President Barack Obama during a trip to Washington last month, said China’s decision on the currency “won’t be advanced by any foreign pressure.”
American manufacturers are pressing for a tougher trade policy. They say America’s trade deficit with China has cost 2.4 million manufacturing jobs at a time when the jobless rate in this country is 9.9 per cent.
Geithner is expected to raise the currency issue when he and Secretary of State Hillary Clinton go to China for two days of high-level talks later this month.
The deficit with the 27-nation European Union rose to $7.1 billion in March, a jump of 32.7 per cent. Imports from Europe rose faster than U.S. exports to the EU.
The deficit with Canada, America’s largest trading partner, fell by 15.8 per cent to $2.3 billion. The imbalance with Mexico rose 26.7 per cent to $6 billion as imports from Mexico hit an all-time high. http://news.therecord.com/Business/article/710990
Thursday, May 13, 2010
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