U.S. Trade Deficit Widens

The increase in U.S. imports was fueled by consumer goods, motor vehicles, parts and engines as well as capital goods

The trade deficit unexpectedly widened in May for the second month on the back of rising imports, the Commerce Department said on July 13.

The trade gap rose to $42.3 billion from $40.3 billion in April.

Most economists had expected the deficit to fall to $39.4 billion.

May exports rose to $152.3 billion while imports climbed to $194.5 billion.

The fresh data indicated that trade could blunt economic growth in the United States although rising imports in the world's largest economy offered hope for global economic recovery, analysts said.

It "suggests trade will be a larger drag on second quarter growth than we first anticipated," said Aaron Smith, a senior economist for Moody's Economy.com.

The U.S. economy grew by 2.7% in the first quarter of 2010 but analysts expect expansion to slow later in the year amid high unemployment caused by the worst recession in decades.

While the widening deficit is "negative" for U.S. gross domestic product, "it is a net positive for global growth," said analyst Kimberly DuBord at Briefing.com

The increase in U.S. imports was fueled by consumer goods, motor vehicles, parts and engines as well as capital goods.

The new data also showed that the politically sensitive trade deficit with China widened $22.3 billion in May from $19.3 billion in April, a development that could fuel calls for a rapid appreciation of the Chinese yuan currency.

Three weeks after the Chinese central bank vowed to loosen its currency controls amid mounting international pressure, the U.S. Treasury said last week the yuan remained "undervalued" against the dollar.

The United States has charged that Beijing kept its currency low against the greenback for a trade advantage.

"To keep Chinese products artificially inexpensive on US store shelves and discourage US exports into China, Beijing undervalues the yuan by 40%," said Peter Morici, a business professor at the University of Maryland.

Copyright Agence France-Presse, 2010

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