The United States is selling fewer products around the world and spending more on cheap imported goods, an imbalance that hurts the job market at home and means the economy is even weaker than previously thought.
The trade deficit of nearly $50 billion for June is the biggest in almost two years, and economists fear that economic growth for the second quarter, which came in at a sluggish rate of 2.4 per cent in early estimates, may turn out to be only half that. "The problem is that to the extent we have a recovery in the US, it is pulling in a lot of imported goods. That means it is not translating into production and jobs at home," said Nigel Gault, chief US economist at IHS Global Insight. Exports for June were down 1.3 per cent, to $151 billion, the Commerce Department reported on Wednesday. At the same time, imports rose 3 per cent, to just over $200 billion.
Overall, trade deficit grew by 19 per cent for the month. The manufacturing sector has been a bright spot in an otherwise sluggish recovery, and if manufacturers have a hard time finding places to sell their products overseas, it could weaken the broader economy.
While US manufacturers have reported increased demand from Asia, exports to Europe are falling behind as it struggles with fallout from its debt crisis. The Dow Jones industrial average fell more than 2.5 per cent.