2012.06.08 15:15:03 U.S. Trade Gap Narrows As European Flows Cool

WASHINGTON--The U.S. trade deficit narrowed in April, as a sharp pullback in imports and exports to the euro zone suggested the region's troubles are increasingly washing up on U.S. shores. The U.S. deficit in international trade of goods and services decreased 4.9% to $50.06 billion from an upwardly revised $52.62 billion the month before, the Commerce Department said Friday. The March trade gap was originally reported as $51.83 billion. Economists surveyed by Dow Jones Newswires had expected the gap to narrow to $49.4 billion. The narrowing in the trade deficit comes concerns mount that the U.S. recovery is losing steam amid a broader global slowdown led by Europe. Both exports and imports receded from record highs, with sales of U.S. goods and services abroad posting the biggest drop in five months. Exports declined 0.8% to $182.91 billion, while imports fell 1.7% to $232.97 billion. With the euro zone teetering on the brink of recession, U.S. exports to the debt-laden region have fallen off. Sales to countries using the euro fell 9.8% in April, while imports declined 11.2%. The overall trade gap with the euro area contracted 14.1% to $7.56 billion. Federal Reserve Chairman Ben Bernanke warned Thursday that Europe's crisis poses "significant risks" to the U.S. recovery, including by weighing on exports. But the Fed chief stopped short of signaling further Fed action to spur growth. Still, the trade gap has created less of a drag on the U.S. economy so far this year, subtracting just slightly from the 1.9% growth rate in the first quarter, according to last week's revised estimate of gross domestic product. During the final quarter of 2011, the deficit subtracted about a quarter of a percentage point from GDP, despite a stronger 3.0% growth rate. Friday's report showed that the real, or inflation-adjusted deficit, which economists use to measure the impact of trade on GDP, fell to $48.51 billion in April from $49.50 billion the month before. Meanwhile, the trade deficit with China continued to expand, rising 13.3% to $24.55 billion. Exports to China fell 14.0%, while imports increased 4.8%. Despite recent indications that the Chinese economy is cooling, Mr. Bernanke said Thursday he was less concerned about the impact of a slowdown in the world's second-largest economy. In fact, slower Chinese growth could actually benefit the U.S. by helping to bring down global oil prices, he told lawmakers. While oil prices have receded over the past month, they continued to spike higher in April amid fears about the ongoing conflict with Iran. The average price of imported crude oil climbing $1.99 to $109.94 a barrel, its highest level since August 2008, Friday's report showed. The cost of crude imports rose to $29.68 billion from $29.24 billion in March, despite a decline in import volumes to 270.00 million barrels from 270.87 million. Since April, however, oil futures have tumbled nearly $18 to eight-month lows below $85 on the New York Mercantile Exchange due to concerns that a global slowdown will sap demand. The Commerce Department report on trade can be found at http://www.census.gov/ft900. Write to Tom Barkley at tom.barkley@dowjones.com and Eric Morath at eric.morath@dowjones.com. (END) Dow Jones Newswires June 08, 2012 08:55 ET (12:55 GMT)