Plus: U.S. Trade Gap Expands, Wholesale Prices Tumble, Equipment Financing Set to Grow through 2014 and Jobless Claims Drop.
U.S. Trade Deficit Widens
The United States trade deficit expanded to $42.2 billion in October, a 4.9 percent increase over the revised $40.3 billion total in September, largely due to plunging demand for exports of U.S. manufactured goods, according to the U.S. Department of Commerce. October exports dropped 3.6 percent to $180.5 billion, the steepest decline since January 2009, while imports fell 2.1 percent to $222.8 billion.
The goods deficit for the month rose to $59.2 billion, a $1.8 billion increase from September, while the services surplus inched down by $0.1 billion to $16.9 billion. Goods exports declined by $6.5 billion to $127.5 billion, led by declining demand for industrial supplies and materials, capital goods, food and beverages and automotive vehicles and parts. Goods imports fell by $4.6 billion down to $186.6 billion, with the steepest drops in consumer goods and automotive vehicles and parts.
“The decrease in exports, which may have been exacerbated by the drought in the Midwest that caused sales of soybeans to plunge, was nonetheless broad-based, indicating cooling economies from Europe to Asia may be sapping demand for American goods, once a mainstay of the economic recovery,” Bloomberg News notes. “The slowdown in imports, which affected everything from electronics to clothing and chemicals, may also be signaling slower U.S. growth.”
Despite these declines, there were some positive signs for the month. U.S. exports to the European Union, which have fallen 0.7 percent this year due to an ongoing debt crisis in the region, rose 1.4 percent in October. However, the politically sensitive trade gap with China widened to a record high of $29.5 billion.
“American manufacturers say China has kept the yuan undervalued against the U.S. dollar. A lower valued yuan makes Chinese goods cheaper for U.S. consumers and American products more expensive in China,” the Associated Press explains. “The Obama administration has lobbied China to move more quickly to allow the yuan to rise in value. But it has refused to cite China as a currency manipulator. That designation would require negotiations between the two nations and could lead to the United States filing a trade case against China before the World Trade Organization.”
Industrial Robots Market Expands
Global demand for industrial robots has grown, reflecting technological improvements and a diversification of applications, a new report shows.
The world market for industrial robots grew to $8.2 billion in 2011, according to a report by IMS Research released last week. While 68 percent of the robots included in this figure were designed to lift payloads in excess of 15 kg (about 33 lbs), IMS predicts revenues from articulated robots designed for payloads smaller than 15 kg will increase by 6 percent a year from 2011 to 2016.
Industrial robots, traditionally used primarily for heavy-duty applications such as welding and assembly, have found wider use in other markets, such as the food, beverage and personal care and consumer electronics industries. Experts cite improvements to machine vision systems and gripping technologies that allow more accurate and delicate robotic handling.
“The interest in industrial robots has increased in labor-intensive industries as companies look to automate and cut costs,” IMS Research Analyst Kiran Patel said in a statement. “Taiwanese electronics manufacturer Foxconn has announced that it plans to deploy 1 million industrial robots in its plants in two to three years. Whether or not this does come into fruition is another question but this certainly points towards the growing application of industrial robots in the industry.”
Wholesale Prices Tumble
U.S. producer prices fell sharply last month due to a sharp drop in the cost of energy, which fell to the lowest level in more than three years and drove prices for wholesale goods down across a range of industries.
According to the latest producer price index from the U.S. Department of Labor, finished goods prices decreased 0.8 percent in November, following a 0.2 percent drop in October and marking the biggest decline since May. Manufacturers’ prices for intermediate goods dropped 1.2 percent, while the crude goods index edged up 0.1 percent.
The cost of gasoline plunged 10.6 percent in November, while imported petroleum prices fell 3.6 percent, driving down the energy index by 4.6 percent. Over the past year, wholesale prices have risen a modest 1.5 percent, well within the Federal Reserve’s inflationary target.
“The decline in producer prices indicates there’s little inflationary pressure building in the U.S. economy,” MarketWatch notes. “Outside of a drought-related increase in food prices, the cost of most goods and services are not rising very much.”
Equipment Financing Posts Strong Growth
New findings indicate that the U.S. equipment finance market will expand over the next two years, growing by $36 billion to a market size of $778 billion in 2014, according to the non-profit Equipment Leasing & Finance Foundation. The study also indicates that finance volumes have already reached peak levels, largely due to favorable interest rates and double-digit growth in equipment investment.
The findings reveal that although volumes are projected to expand, they will grow at a decelerating pace in the next two years. The slowdown will be affected by “uncertainties” at home and abroad, as companies remain cautious about higher interest rates. Larger firms, for example, may draw on their cash reserves to acquire equipment.
Equipment and software investments are expected to reach $1.28 trillion in 2012, with total equipment finance volume at $725 billion, which exceeds the pre-recessionary peak, according to the foundation’s 2007-2008 survey. By comparison, last year, the total size of private and public investment in equipment and software totaled $1.19 trillion, and $664 billion was financed.
The foundation based its report on data from various sources, including a 2012 survey of 427 borrower businesses, 372 of which purchased business equipment in 2011.
“The equipment finance sector not only contributes to businesses’ success, but to U.S. economic growth, manufacturing and jobs,” William G. Sutton, president of the foundation, said in an announcement of the findings. “This study reveals the importance of resolving political and regulatory uncertainty so businesses can feel more confident about their futures and invest in capital equipment and job creation.”
Weekly Jobless Claims Plunge
New initial jobless claims fell considerably in the latest week reported, plunging close to a four-year low and providing strong evidence for improvement in the labor market. According to the U.S. Department of Labor, unemployment claims for the week ending December 8 decreased by 29,000 to a total of 343,000.
Moreover, the four-week moving average, which smoothes out volatility and provides a clearer long-term picture of job market conditions, dropped by 27,000 down to a total of 381,500.
“The decline confounded analysts’ expectations that claims, a sign of the pace of layoffs, would rise to 375,000,” Agence France-Presse reports. “Initial jobless claims have fallen back to their lowest level since the week ending October 6, before Hurricane Sandy battered the Northeast at month’s end, sending claims sharply higher.”
In addition to the disruptions caused by the hurricane, jobless claims have fluctuated widely over the past month due to the holiday season. Claims data tends to be volatile between Thanksgiving and New Year because of temporary hiring and seasonal layoffs in businesses like construction.