The U.S. economy is again struggling to meet lofty
expectations, with a drop in exports standing as the latest obstacle to robust
growth this quarter. The nation's trade deficit widened 7% in April from a
month earlier to its highest level in two years, the Commerce Department said
Wednesday. Imports rose 1.2%, but exports fell 0.2%, marking the fourth decline
in five months.
The report suggests American households and firms stepped up
spending after snowstorms and icy weather walloped the economy in the winter.
But much of their spending—on items like cars, cellphones and machinery—flowed
outside the U.S. to foreign firms, undercutting domestic growth.
The export drop suggests sluggishness in overseas economies
like Europe is sapping demand abroad for American-made products and services.
Exports declined across the board, hitting farmers, jewelers, jet-engine makers
and drilling-equipment manufacturers.
That could weigh on U.S. factories at a time when the
recovery is losing support from sectors such as the housing market. Economists
still largely expect a decent rebound from the first quarter, when gross domestic
product contracted at a 1% annual rate.
But they have tempered their expectations. Credit Suisse
economists on Wednesday said they expect the economy to grow at a 3% annual
rate from April through June, down from a previous estimate of 4%.
A 3% growth pace generally would be seen as a healthy clip
in normal times. But the five-year-old U.S. recovery has been plagued by fits and
starts, with bursts of momentum often evaporating within months. If current
forecasts are met, economic growth in the first half of 2014 will average
between a 1% and 2% pace. That would even be below the 2.25% average between
2010—the first full year after the recession—and last year.
The trade report wasn't entirely negative. Overall imported
goods, along with imports of cars, consumer goods and capital goods, hit record
levels in dollar terms. The renewed spending suggests underlying strength in
the economy. And while exports have slipped, they haven't fallen sharply amid
global economic malaise and political upheaval.
Manufacturing activity expanded at a faster pace in May from
a month earlier, the Institute for Supply Management said earlier this week.
The group's report—based on a survey of purchasing managers' sentiment—showed
exports climbed at a healthy pace last month. The ISM said Wednesday that
service-sector activity expanded in May to its highest level in nine months.
Other reports also showed overall factory orders climbed in April and auto
sales surged in May.
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