Transcripts

Rising Oil Prices Are Greasing The Trade Gap

LINDA O`BRYON: The U.S. trade gap widened in April, after two months of declines, thanks to higher oil prices and growing imports from China. Still, the increase was less than most analysts expected. And as Stephanie Dhue reports, there are some positive trends in the numbers for American manufacturers.

STEPHANIE DHUE, NIGHTLY BUSINESS REPORT CORRESPONDENT: The gap between what the U.S. sells overseas and buys from other countries rose to over $63 billion in April, a 2.5 percent increase from March, but still lower than the $65 billion deficit analysts predicted. The tab for foreign oil accounted for almost all of the increase in that gap. Crude oil topped $75 a barrel in April. While that widened the trade gap, it actually may help domestic manufacturers take back market share from importers.

CHARLES MCMILLION, PRESIDENT AND CHIEF ECONOMIST, MBG INFORMATION SERVICES: Some producers of goods, at least, may be beginning to reconsider their global sourcing models. Those models were developed during a time of very cheap oil and cheap transportation.

DHUE: Imports of Chinese furniture, toys and electronics helped grow the politically sensitive trade deficit with China. But there are some signs the trade gap in manufactured goods, which make up two-thirds of the trade deficit is stabilizing. The U.S. trade gap with the European Union narrowed more than 7.2 percent to $9.4 billion.

FRANK VARGO, VP INTERNATIONAL ECONOMIC AFFAIRS, NATIONAL ASSOCIATION OF MANUFACTURERS: If we are reading the trends correctly, and the manufacturing balance is turning, that would be good news for the third quarter or the fourth quarter of this year.

DHUE: The dollar rallied this morning on news of the better-than- expected trade numbers. But analysts say the currency markets aren`t discounting the risk of the trade deficit.

ALEX BEUZELIN, SENIOR MARKET ANALYST, RUESCH INTERNATIONAL: This is still seen as one of the key risks facing the U.S. dollar over the medium and longer term, but I think that the trade deficit is not seen as quite the risk for the dollar here in the short term, given the markets` renewed focus on the Federal Reserve.

DHUE: A softer dollar would help lower the trade deficit and analysts expect the dollar to weaken once the Federal Reserve takes a pause raising rates. Stephanie Dhue, NIGHTLY BUSINESS REPORT, Washington.