http://www.bloomberg.com/apps/news?pid=20601087&sid=a_15TjtHqhwM U.S. Trade Gap Widened in April as Exports Slumped (Update1) Share | Email | Print | A A A By Shobhana Chandra June 10 (Bloomberg) -- The U.S. trade deficit widened in April for a second month as exports dropped to the lowest level in almost three years, offering little sign of an end to the worst global recession in the post-World War II era. The gap between imports and exports grew 2.2 percent to $29.2 billion, in line with forecasts, from a revised $28.5 billion in March that was larger than previously estimated, the Commerce Department said today in Washington. Foreign demand for U.S. goods dropped 2.3 percent, exceeding a decrease in imports. Imports may rebound first in coming months as the U.S. economy begins to expand, while exports languish until a recovery takes hold among trading partners from Japan to Germany, widening the deficit further. That danger underscores Treasury Secretary Timothy Geithnerâs call for other nations to implement stimulus and financial-rescue plans. âWeâre certainly not looking for trade to be a leading component of the U.S. recovery,â Stephen Gallagher, chief U.S. economist at Societe Generale in New York, said before the report. âAs the inventory situation improves, businesses will start importing a bit more, but thatâs a few months away. The rest of the world will, on average, be weak.â Economistsâ Forecasts The trade gap was projected to widen to $29 billion from an initially reported $27.6 billion in March, according to the median forecast in a Bloomberg News survey of 73 economists. Deficit projections ranged from $31.5 billion to $26 billion. A growing gap means trade will not help the economy this year as much as in 2008, when it contributed the most to growth in three decades. The drop in exports reflected reduced foreign demand for engines, machinery and metals. At $121.1 billion, the level of exports was the lowest since July 2006. âRecovery here depends on recovery abroad,â Geithner, who departs for weekend meetings in Italy with counterparts from some of the worldâs biggest economies, told lawmakers yesterday. âWe are working closely with other major economies to put in place the fiscal stimulus and make the financial repairs necessary to ensure U.S. and global recovery.â Exports to Japan dropped to the lowest level since 1994 and those to South and Central America were the weakest in two years, todayâs report showed. Lowest Since 2004 Imports decreased 1.4 percent to $150.3 billion, the fewest since September 2004. The drop was led by declines in purchases of fuel, other than crude oil, drilling equipment, computer accessories and toys from abroad. Imports of crude oil rose as the price climbed to $46.60 a barrel from $41.36 in March, according to todayâs report. Higher fuel costs will probably keep boosting the import bill. A barrel of crude oil on the New York Mercantile Exchange touched a seven-month high of $70.32 on June 5, compared with an average $49.95 in April. After eliminating the influence of prices, which are the numbers used to calculate gross domestic product, the trade deficit grew to $39.4 billion from $39.1 billion in March. Aprilâs reading was just above the $39 billion average for the first quarter, indicating changes in trade, so far, will have little influence on growth. The politically sensitive trade gap with China increased to $16.8 billion from $15.6 billion in the prior month. Chinaâs Currency Geithner, on a visit to China this month, avoided a showdown over its currency, the yuan. He declined to repeat his comment in January that the nation was âmanipulatingâ the currency and instead welcomed a Chinese commitment to more flexibility over time. The yuan has gained 0.3 percent in the past six months. A narrowing of the gap prevented the economy from contracting even more last year. Trade contributed 1.4 percentage points to growth in 2008, the most since 1980. The boost has continued so far this year. The economy shrank at a 5.7 percent annual rate in the first quarter, even as trade made a positive contribution of 2.2 percentage points. An improvement in trade will likely come too late to help global growth. The International Monetary Fund in April said the world economy will shrink 1.3 percent this year and a recovery may take place in the first half of next year. It predicted a 1.9 percent expansion for all of 2010. Chinese Growth Some regions are faring better than others. China may expand 7.5 percent this year, according to the median forecast in a Bloomberg survey. Still, the government cautioned this month that a recovery isnât yet solid. Japanâs deepest postwar recession is easing, according to the governmentâs broadest measure of economic health released this week. For some companies, overseas sales are helping cushion weakness elsewhere. Texas Instruments Inc., the second-largest U.S. semiconductor maker, raised its second-quarter sales and profit forecasts this week as customers slowed the pace of inventory reductions and demand improved in Asia. âOrders were strong in both April and May thus far, so all thatâs looking good,â Vice President Ron Slaymaker said on a conference call this week. âAsia is the biggest driver of growth with the U.S. and Europe continuing to lag.â To contact the reporters on this story: Shobhana Chandra in Washington at schandra1@bloomberg.net Last Updated: June 10, 2009 08:49 EDT