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US April trade gap widens; hunger for foreign goods soars

The U.S. trade deficit widened to its highest level in two years in April as imports hit a record high, suggesting trade could be a drag on second-quarter growth.

The Commerce Department said on Wednesday the trade gap increased 6.9 percent to $47.2 billion. That was the largest since April 2012 and followed March's revised $44.2 billion gap.

Economists polled by Reuters had expected the deficit to widen only to $40.8 billion from a previously reported $40.4 billion shortfall. The government also published its annual benchmark revisions with Wednesday's data.

When adjusted for inflation, the deficit increased to $53.8 billion from $50.9 billion in March. Trade subtracted almost a percentage point from first-quarter gross domestic product. The economy contracted at a 1.0 percent annual pace in the first three months of the year.

Imports increased 1.2 percent to an all-time high of $240.6 billion in April. Imports of automobiles, capital goods, food and consumer goods all hit record highs in April. The trade deficit with the European Union was the largest on record, as was the gap with Germany.

Imports from South Korea also touched a record high, while Chinese imports rose 16.3 percent. That pushed up the politically sensitive trade gap with China to $27.3 billion from $20.4 billion in March.

Exports slipped 0.2 percent to $193.3 billion.


Shipping cranes unload a container ship at the Port of Virginia APM Terminal in Portsmouth, Virginia.
Luke Sharett | Bloomberg | Getty Images
Shipping cranes unload a container ship at the Port of Virginia APM Terminal in Portsmouth, Virginia.

Productivity drops sharply

In a separate report, U.S. nonfarm productivity fell at its sharpest pace in six years in the first quarter as harsh winter weather depressed output, leading to a jump in labor-related production costs.

The Labor Department revised productivity data to show it tumbling at a 3.2 percent annual rate. That was the biggest drop since the first quarter of 2008. It had initially been reported falling at a 1.7 percent rate.

The drop in productivity, which mirrored a decline in economic growth during the same period, is likely temporary. Economists had expected productivity, which measures hourly output per worker, would be revised down to show it contracting at a 2.7 percent pace.

It increased at a 2.3 percent pace in the fourth quarter.

The economy was slammed by an unusually cold winter and businesses accumulating inventories at a slower pace. There are signs, however, that growth has since rebounded.

Economists expect gross domestic product growth to top a 3.5 percent rate this quarter, after declining at a 1.0 percent pace in the first three months of the year.

The trend in productivity, however, remains modestly up. Compared to the first quarter of 2013, productivity increased 1.0 percent rather than 1.4 percent.

Workers put in more hours in the first quarter but with output falling, that raised labor costs. Unit labor costs, the price of labor per single unit of output, surged at a revised 5.7 percent rate.

It was the biggest rise in unit labor costs since the fourth quarter of 2012. Unit labor costs were previously reported to have increased at a 4.2 percent rate. They fell at a 0.6 percent rate in the fourth quarter.

Despite the jump last quarter, there was little sign that wage inflation was igniting. Unit labor costs rose by a revised 1.2 percent compared to the first quarter of 2013. They had previously been reported to have increased at a 0.9 percent rate.

--By Reuters

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