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1. U.S. Trade Deficit Balloons Again
2. Oil Prices Fall to Eight-Month Low
3. Jobless Claims Rise by 4,000
4. Europe Faces Baby Boomer Crisis Too
1. U.S. Trade Deficit Balloons Again
After news yesterday that the nation's estimated budget deficit has been slashed
by more than 40 percent, the U.S. government today announced that the U.S. trade
deficit hit a new record high in August. The trade deficit unexpectedly rose to
$69.9 billion in August. The U.S.' deficit with China also reached an all-time
high.
The trade deficit widened $1.9 billion in August, compared to the prior month
when the deficit was at $68 billion. That's 19 percent higher than a year
earlier, says Moody's Economy.com.
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The average trade deficit estimate given by analysts was a drop to $66.7
billion, according to a Bloomberg News survey. Forecasts ranged from $63.5
billion to $69 billion, but none anticipated this much of an expansion.
The widened trade deficit reflects an increase in imports into the U.S. of
computers, commodities, and consumer goods. Total imports of goods and services
rose 2.4 percent in August to $192.3 billion while exports increased 2.3 percent
to $122.4 billion. The U.S. shipped record amounts abroad, says Bloomberg, but
not enough to bridge the gap.
Specifically, high oil prices were a main reason why the trade deficit expanded,
as the U.S. imported $27.2 billion worth of oil. Falling prices since August
will likely help the deficit next month.
"Trade will still be a drag of about 0.8 percentage point on third-quarter
growth," said Ian Shepherdson, chief U.S. economist at High Frequency Economics
in Valhalla, New York, to Bloomberg News.
The U.S. trade deficit with China widened to $22 billion from $19.6 billion in
July, as imports from China increased to $26.7 billion in August and exports to
China fell to $4.8 billion. That's both a new record high for the deficit with
China and for imports from China.
Some congressmen in the U.S. have been pressuring the Bush administration to
take a stronger stance with China or threatening to levy tariffs on Chinese
goods. These lawmakers say that China's cheap goods hurt U.S. businesses.
To narrow the trade gap, the value of the dollar must fall relative to other
currencies. That would make U.S. goods more competitive and boost exports.
According to Bloomberg, "because the U.S. imports about 50 percent more goods
and services than it sells abroad, exports have to grow about twice as fast just
to stabilize the deficit."
Long-term, the trade deficit would likely mean higher interest rates for
Americans. The U.S. must attract foreign investment to offset the trade deficit
and they'd do that by paying higher interest rates.
Editor's Note:
2. Oil Prices Fall to Eight-Month Low
Oil prices slipped Thursday after settling at their lowest level this year in
the previous session as markets awaited the release of a weekly U.S. petroleum
supply snapshot.
Light sweet crude for November delivery dropped 8 cents to $57.51 a barrel in
electronic trading on the New York Mercantile Exchange by midday in Europe. The
contract had fallen $1.12 Wednesday to settle at $57.59, the lowest since Dec.
19, as doubts grew that there is a consensus within OPEC for an immediate output
cut.
November Brent crude on the ICE Futures exchange fell 24 cents to $58.41 a
barrel.
Since July, the cost of crude oil has dropped by more than 25 percent amid
rising global inventories, concerns about slowing economic growth, and a
milder-than-anticipated hurricane season. Adding to downward pressure, the
International Energy Agency once again lowered this year's global demand
forecast in a report issued Wednesday.
Vienna's PVM Oil Associates suggested that more downward revisions to demand
could be forthcoming.
"Since the beginning of the year, the agency has been continuously correcting
its demand growth expectation for 2006," it said, in a research note. "The total
[downward] correction now already sums up to a differential of 810,000" barrels
per day.
Against this backdrop, the president of the Organization of Petroleum Exporting
Countries, Nigerian oil minister Edmund Daukoru, said Wednesday that a new OPEC
cut has been agreed to, and that members were "nearing consensus" on how to
apportion the cuts.
But Saudi Arabia, the country whose participation is necessary to make any
significant output reduction, has not publicly confirmed this.
The last time OPEC trimmed its output — by 1 million barrels a day — was
December 2004, when oil traded slightly above $40 a barrel. That caused an
immediate spike in prices.
Market participants awaited a weekly fuel inventories report to be released
Thursday by the U.S. Energy Department, expected to show gains in domestic crude
oil and distillate stocks.
Crude oil inventories are expected to gain by about 500,000 barrels, while
stocks of distillates, which include heating oil, are forecast to gain by about
400,000 barrels a day, according to a Dow Jones Newswires survey of analysts.
Gasoline inventories are seen falling by about 600,000 barrels, according to the
analysts' average.
In Nymex trading Thursday, heating oil futures were down 0.28 cent at $1.6692 a
gallon while gasoline prices edged 0.43 cent lower to $1.4460 a gallon. Natural
gas prices fell 30 cents to $6.120 per 1,000 cubic feet.
© 2006 Associated Press.
Editor's Note:
3. Jobless Claims Rise by 4,000
First-time claims for U.S. jobless benefits inched up 4,000 to 308,000 last
week, nearly matching expectations, Labor Department data showed on Thursday.
However, new claims for state unemployment insurance benefits filed by Saturday
may not have captured about 15,000 workers who went on strike on Oct. 5 at
Goodyear tire plants in the United States and Canada.
The median estimate from Wall Street analysts surveyed by Reuters had put
first-time claims at 310,000.
Jobless claims were revised up to 304,000 from the preliminary 302,000 for the
week ended Sept. 30, the Department said.
The four-week moving average of new claims, which irons out volatile weekly data
to provide a better picture of underlying labor market trends, eased 750 last
week to 313,250.
The number of people who continued to file for jobless benefits after drawing an
initial claim of aid rose by 5,000 to 2.445 million in the week ended Sept. 30,
the Labor Department said.
© 2006 Reuters.
Editor's Note:
4. Europe Faces Baby Boomer Crisis Too
Like the U.S., Europe is facing a looming pension crisis because of its aging
population. The European Union Commission warned its member states that a "time
bomb" is ticking and they must do something about it.
"Unless most member states do something serious about defusing the pension time
bomb, it will go off in the hands of our children and grandchildren," said EU
Monetary Affairs Commissioner Joaquin Almunia, reports The Associated Press.
EU Social Affairs Commissioner Vladimir Spidla said that, by 2050, there would
be just two workers to support each retiree, compared to the four to one ratio
today. In addition, falling birthrates in the EU will worsen the problem in the
future.
The EU bases their comments on a study of the long-term sustainability of public
finances.
"Doing nothing is not enough, policy action is needed," said Almunia.
The body is recommending its member states take belt-tightening measures
quickly. The report recommends, "cuts in public debt, raising employment, and
improving productivity." Implementing the plan would likely result in a revamp
of health, pension, and other social programs, says Alumnia.
Alumnia is calling for member states to balance their budgets so that debt is 80
percent of gross domestic product by 2050, compared to the projected 200 percent
of GDP that it could grow to if ignored.
The EU is also recommending that states increase the employment rate to 70
percent, from 63.8 percent last year. Plus, workers will have to remain in the
work force longer.
"Pension reforms will be fully successful only if they are accompanies by a
prolongation of working lives," said an EU statement.
The looming baby-boom crisis could mean lower living standards across the globe.
Without a large population in the workforce, prices for goods and services will
rise, forcing retirees to spend more of their savings.
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