US exports skid, widening US trade gap

US exports fell for the second straight month in June despite a weaker dollar, as soft foreign markets undermined a key driver of the economic recovery, government data showed Thursday. Slower exports helped expand the country's foreign trade deficit to $53.1 billion, the widest shortfall in more than two and a half years, despite easing oil prices and government efforts to close the gap, the Commerce Department said. The trade gap was much bigger than expected by most analysts, who penciled in an average estimate of $48.0 billion, on a seasonally adjusted basis. "It appears that one of the last fully functioning engines of growth may be faltering," said Gregory Daco, at IHS Global Insight. "Even a historically low dollar could not drive excess foreign demand," said Jeffrey Rosen, an economist at Briefing.com. "With fiscal austerity taking hold across Europe and growth in Asia slowing -- specifically in China -- room for export growth is suddenly shrinking" and those conditions appear likely to persist for some months, he added. For the second month in a row, the US trade deficit was the biggest since the $59.5 billion gap in October 2008. The department revised the May number higher to $50.8 billion. Imports fell a modest 0.8 percent from May, to $223.9 billion. The decrease was mainly due to a decline in prices for oil and commodities used in manufacturing, a sector that slowed in June. But in a worrying development for US economic growth, exports fell for the second consecutive month, by 2.3 percent from May to $170.9 billion. The hardest-hit goods exports were industrial supplies and materials; capital goods; and foods, feeds and beverages. Services exports were virtually unchanged from May to June. The politically sensitive trade gap with China leaped 6.8 percent to $26.7 billion, setting off renewed calls for stepped-up US pressure on Beijing to allow its yuan currency to appreciate. The head of the Alliance for American Manufacturing, Scott Paul, said that China has taken only "sporadic baby steps" to increase the value of the yuan in the face of criticism its kept undervalued for a trade advantage. A revaluation of "at least" 30 percent was needed, he said. "Unless the Obama administration gets tougher with China, we'll continue to see high trade deficits and anemic job growth." The June decline in exports shook one of the pillars of the US economy's struggle to recover from severe recession that officially ended two years earlier. President Barack Obama has set a goal of doubling exports over five years, to 2015, in an attempt to jump-start the sluggish economy and fight high unemployment. "The longer the president and Congress wait to slash the trade deficit, the longer a sound US economic recovery will take," warned Alan Tonelson, a research fellow at the US Business and Industry Council. John Ryding and Conrad DeQuadros, at RDQ Economics, estimated the June trade gap would subtract about 0.4 percentage points from the initial estimate of a 1.3 percent annual rise in gross domestic product. The disappointing trade data came after the Federal Reserve said Tuesday that it would maintain ultra-low interest rates for two more years to offset slower-than-expected growth in the world's largest economy. The US Labor Department separately reported Thursday that initial jobless claims fell last week for the third week running, but barely half of the nearly 14 million people unemployed were drawing unemployment benefits. The Fed, in announcing support for the economy Tuesday, estimated the high unemployment rate -- which stood at 9.1 percent in July -- "will decline only gradually" amid increasing "downside risks" to the economy.