Plus: Trade Deficit Expands, Manufacturing Execs Show Surging Optimism and Labor Market Strengthens.
U.S. Trade Gap Widens in January
The United States trade deficit rose to $52.6 billion in January, a 4.3 percent increase over the revised $50.42 billion total in December, as imports surged due to high demand for foreign-made cars, computers and food products, according to the U.S. Department of Commerce on Friday. January exports rose to $178.2 billion, while imports climbed to $228.7 billion.
The goods deficit for the month grew to $67.5 billion, a $2.4 billion increase over December, while the services surplus rose $0.3 billion to a total of $14.9 billion. Goods exports climbed $1.9 billion to $128.6 billion, led by capital goods and automotive vehicles, parts and engines. Goods imports increased $4.3 billion to $196.1 billion — the highest level since July 2008 — also led by automotive vehicles and industrial supplies and materials. Services exports grew by $0.7 billion to $52.2 billion, while services imports increased $0.4 billion to $37.3 billion.
“The U.S. trade deficit with the European Union bumped up to $8.5 billion in January from $5.6 billion a year ago,” MarketWatch reports. “Economists believe a recession in Europe will mean that U.S. exports may struggle in 2012. At the same time, Europe will seek to send more exports to the U.S. And the trade gap with China continues to expand after setting a new annual record in 2011.”
In January, the politically sensitive deficit with China rose 12.5 percent to $26 billion, as exports to China fell 3.8 percent to $8.37 billion and imports from China rose 4.7 percent to $34.4 billion. Last year, the trade gap with China hit a record $295.5 billion, the largest deficit ever recorded with a single country.
“The expanding trade gap with China will likely continue to fuel political action in Washington. Although Beijing has raised the value of the yuan against the dollar by around 40 percent since 2005, its currency is still deemed undervalued and an unfair competitive advantage by many U.S. businesses,” the Wall Street Journal notes. “And despite a measured uptick in trade filings against China, U.S. firms are also urging the Obama administration to take a more aggressive stance against a number of Beijing’s economic and trade policies.”
According to the Manufacturers Alliance for Productivity and Innovation (MAPI), U.S. manufactured goods exports rose 12 percent, or $123 billion in 2011, while Chinese exports grew 20 percent, or $302 billion. “China’s exports are on track to double U.S. exports by 2015, while in 2000, U.S. exports were three times larger than Chinese exports,” MAPI explains. “As the trade imbalances continue, storm clouds gather.”
Congress Approves Punitive Tariffs to Combat China Subsidies
The U.S. Congress last week approved a bipartisan measure affirming the powers of the U.S. Department of Commerce to impose higher duties on goods from China and other countries considered to be state-run economies that subsidize their exports to the U.S.
The bill responds to a mid-December decision by a federal appellate court that said existing law doesn’t authorize the agency to levy the punitive tariffs because Congress had never explicitly given the agency that right.
“The Commerce Department has been applying these ‘countervailing’ duties since 2007,” the Associated Press reports. “The legislation ensures that 24 existing higher tariff orders and six pending investigations against imports from China and Vietnam will continue to be valid. Of those 24, 23 are directed at Chinese subsidies.”
The conservative group Club for Growth opposed the measure, which it said would increase the price of imported goods. On Tuesday, the anti-tax group “blasted the measure as a ‘tax increase’ after the Congressional Budget Office estimated it would raise $160 million in new revenue over 10 years, Reuters notes. But the National Association of Manufacturers (NAM) strongly supported the bill, saying in a statement that “the trade-distorting subsidized exports from China…threaten jobs and growth.”
China’s commerce minister criticized the new U.S. trade enforcement measures but acknowledged that some Chinese authorities might be improperly subsidizing exporters.
The Obama administration welcomed the swift congressional approval, Agence France-Presse says, and President Obama plans to sign the bill.
Manufacturing Execs Show Surging Optimism about U.S. Economy
The number of middle-market manufacturing and distribution executives who are optimistic about the U.S. economy is 146 percent greater now than it was a few short months ago, according to McGladrey & Pullen.
In its latest survey of midmarket manufacturing and distribution executives, the tax and consulting firm found that 59 percent of respondents said they are optimistic about the U.S. economy, up from 24 percent in the fall 2011 survey.
“Optimism about the world economy increased significantly, as well, with 27 percent indicating optimism this winter, compared to 17 percent in the fall,” Karen Kurek, national manufacturing leader for McGladrey & Pullen, LLP, said in a statement. “These increases in optimism are good signs for 2012.”
The number of respondents who characterized their companies as “thriving and growing” averaged 45 percent throughout 2011, nearly twice the level of those who responded positively in 2010 (24 percent), and comparable to 2007 levels (48 percent), the winter findings indicate. Automotive and transportation executives are more likely than others to be optimistic about their companies, and automotive and industrial machinery executives are more likely than others to be optimistic about their industries.
However, the increased optimism among manufacturing executives was tempered by several factors, including federal government gridlock, access to free trade agreements, the lack of a meaningful energy policy in the U.S. and the uncertainty of regulations due to the impending election this fall. Executives also expressed concern about finding skilled workers.
Unemployment Rate Unchanged in February
Although the U.S. economy added 227,000 net new jobs in February, the national unemployment rate remained unchanged at 8.3 percent, the lowest level in roughly three years, the U.S. Department of Labor reported Friday. Employment gains were also revised for January and December, indicating that 61,000 more jobs were created in those two months than initially reported.
“The increase in nonfarm jobs topped 200,000 for the third straight month, which reinforces the view of an economy gathering strength as 2012 unfolds. The past three months of full-time job growth — aided by unusually warm winter weather — is the fastest since the end of the 2007-2009 recession and marks the best performance since early 2006,” MarketWatch reports. “The influx of new jobs is also pumping more cash into the economy in the form of wages and salaries, generating fresh demand among consumers for the goods and services that businesses produce. Consumer spending accounts for 70 percent of U.S. economic growth.”
The largest gains were in the service-providing industries, led by 82,000 new jobs in professional and business services. Health care employment also continued to rise, gaining 61,000 jobs, while the leisure and hospitality industry rose by 44,000. The manufacturing sector, which had posted steady employment gains in the last several months, added 31,000 jobs in February. All the gains were in durable goods manufacturing, led by fabricated metal products (11,000 jobs), transportation equipment (8,000 jobs) and machinery (5,000 jobs).
“In all, 142.1 million Americans reported that they had a job in February, the highest since January 2009, during the depths of the recession. Manufacturing payrolls are the highest since April 2009,” the Associated Press notes. “And over the past three months, the number of employed people has risen by 1.45 million, the biggest three-month gain since March 2000.”
Hiring is expected to remain strong in the manufacturing sector. The latest monthly report from the Society for Human Resource Management found that 55.6 percent of manufacturers plan to hire additional staff in March, while only 5.1 percent expect to cut jobs, marking the largest net job gain since July 2006.