November trade gap widens, biggest since June; hits $47.8 billion

WASHINGTON ― The trade deficit widened in November to its largest in five months, suggesting imports weighed on economic growth more heavily than expected during the fourth quarter.

The trade gap totaled $47.8 billion, exceeding analysts’ forecast of a $45.0 billion deficit, Commerce Department data showed on Friday.

The government revised its initial estimate for October’s trade deficit slightly lower to $43.3 billion.

Imports rose 1.3 percent to $225.6 billion as Americans bought more industrial supplies from abroad and spent more on foreign oil.

It was the biggest increase in imports since May, according to seasonally adjusted figures. The average price for imported oil rose to $102.50 per barrel, up 3.7 percent from October. The volume of oil imports also rose.

Imports of capital goods, which are used in domestic workplaces, climbed to a record high.

A wider trade deficit shows that more goods and services bought by U.S. businesses and consumers were produced outside the country, subtracting from gross domestic product.

Also weighing on the economy, exports fell 0.9 percent in November to $177.8 billion.

Just as higher imports might be a sign of increasing consumer demand within the country, the drop in exports might reflect the recent cooling in the global economy.

However, the report also gave a hint of a modest improvement in the politically charged trade imbalances between the United States and China.

Orange juice surges 11 percent to record on Brazil fungicide fears

NEW YORK ― U.S. orange juice futures surged almost 11 percent to an all-time high on Tuesday, as reports that discovery of small doses of an unapproved fungicide in Brazil could crimp juice imports from that country added fuel to a rally sparked by a brief freeze last week in Florida.

The benchmark March frozen concentrated orange juice contract on the ICE Futures U.S. exchange, one of the smallest futures markets featured in the 1980s movie Trading Places, jumped the 20-cents daily limit to $2.0775 at 9:46 a.m. EST, taking two-day gains to nearly 17 percent.

The front-month January FCOJ contract, which expires Tuesday, was at a record high of $2.12, according to Thomson Reuters data. This rally exceeds the one that caused prices to rise four-fold in 2005 and 2006 after a series of hurricanes slammed into Florida and battered the crop, spreading diseases such as citrus greening, which is fatal for citrus trees.

The latest surge appeared related to news reports that the Food and Drug Administration had told juice makers that it would step up testing for the fungicide carbendazim, which is used in Brazil but is not authorized for use in the United States. The reports said the FDA had been contacted by an unidentified company that had discovered low levels in its own juice.

“Brazil used it last year supposedly, and it wound up in some of the orange juice of at least one (U.S.) company processing the oranges,” said James Cordier, president of Tampa, Florida-based Liberty Trading Group.

“We lost oranges on the freeze last week but this certainly trumps that,” he said. “If they ban Brazilian orange juice OJ has … another 20 to 30 cents on the upside at least.”

Brazil is the world’s largest orange juice exporter, accounting for more than half of the sea-borne orange juice trade.

Analysts said the freeze that hit Florida last week had done only minimal damage to the crop. Meteorologists said on Tuesday that there was no further sign of harsh weather on the horizon in the No. 1 growing state. Prices rose nearly 8 percent last week on the freeze, but appeared to have cooled by week’s end.

Country Hedging Inc analyst Sterling Smith said there was “some nervousness” about the freeze ahead of the U.S. Agricultural Department’s monthly supply/demand report on Thursday when the next Florida 2011/12 citrus crop estimate update is released. But others saw little cause for alarm.

“We experienced a little bit of damage. It was by no means catastrophic. We had some cold pockets across the state that had some burned leaves, maybe some twig damage, some reports of slush ice,” said Andrew Meadows, a spokesman for Florida Citrus Mutual, the state’s largest growers association.

But beyond the fundamentals, some traders attributed the price spike to a possible market “squeeze”, with short-sellers scrambling to cover their positions ahead of a possible shortfall in supplies. Trade was almost completely concentrated in the March and May contracts.

The orange juice market is particularly susceptible to dramatic volatility due to its tiny size compared with oil and other major commodities. Trading volume for March was just 1,270, an average day equivalent to about $19.05 million in nominal value.

“You’re seeing the rest being dragged along because of all the buying being done in March and May,” a trader said.

August import prices fall 0.4 percent on petroleum, Labor Department reports

WASHINGTON ― Import prices fell in August due to lower fuel costs, potentially giving the central bank more room for stimulus measures to boost the economy, data showed on Tuesday.

A drop in prices for petroleum helped push import prices 0.4 percent lower following a 0.3 percent increase in the previous month, the Labor Department said in a report. Prices for food and industrial materials also fell.

Analysts polled by Reuters had expected import prices to fall 0.8 percent in August.

With unemployment stuck near 9 percent and wages stagnant, more costly imports have been a principle form of inflationary pressure in the U.S. economy. Highlighting how much oil prices have risen, petroleum import prices were up 43.5 percent in August from a year earlier.

U.S. Federal Reserve Chairman Ben Bernanke said last week that such pressures would ease due to tamer prices for oil and other commodities. Less inflation pressure gives the Fed more room to try to boost growth, and policymakers are expected to unveil more stimulus measures soon.

“The decline in market energy and commodity prices in recent weeks is likely to lead to a further easing in headline import prices,” said Peter Newland, an analyst at Barclays Capital in New York.

Newland said, however, the report suggested pipeline pressures at the core level continue to build, reflecting the effects of a weaker dollar and inflationary pressures abroad.

Excluding petroleum, import prices rose 0.3 percent, accelerating from a 0.1 percent increase in July.

Bernanke had suggested a rebound in auto production following Japan’s March earthquake disaster — which created bottlenecks in the industry that pushed prices higher — would ease inflation pressures as well.

Prices for imported cars and car parts were unchanged last month, while consumer goods rose 0.3 percent when autos and parts were stripped out.

Export prices rose 0.5 percent in August after falling 0.4 percent in July. Economists had expected export prices to be unchanged last month.

June import prices post first decline in a year as oil, food costs fall

WASHINGTON ―Import prices fell in June for the first time in a year as petroleum and food costs tumbled, according to a government report on Wednesday that suggested the commodity-driven spike in inflation was abating.

Overall import prices dropped 0.5 percent, breaking eight straight months of increases, the Labor Department said, after gaining 0.1 percent in May.

Economists polled by Reuters had expected prices to drop 0.6 percent last month. Import prices were up 13.6 percent in the 12 months through June.

Stripping out fuel and food, import prices were flat after rising 0.6 percent in May. The report supported the contention by Federal Reserve officials and independent economists that the commodity-induced jump in inflation would be temporary.

Data on Thursday is expected to show that wholesale prices fell 0.2 percent in June from May, according to a Reuters survey. The producer price index rose 0.2 percent in May.

High inflation undercut economic activity in first quarter, with growth slowing sharply to a 1.9 percent annual rate after a brisk 3.1 percent expansion in the final three months of 2010.

So far, data suggest that still-high commodity prices and disruptions to motor vehicle production because of a shortage of parts from Japan contributed to keeping growth sluggish during the April-June quarter.

Last month, a 1.6 percent drop in imported petroleum prices helped to push import prices down. The drop in petroleum in June was the biggest in a year and followed a 0.9 percent fall in May.

Imported food prices declined 1.9 percent, the largest fall in more than two years, after sliding 0.7 percent in May.

The price of imported motor vehicles and parts rose 0.3 percent last month after increasing 0.5 percent in May. The rise in motor vehicle prices reflects the lingering effects of supply chain disruptions after the March earthquake in Japan.

The Labor Department report also showed export prices edged up 0.1 percent in June after rising 0.2 percent the prior month. Analysts had expected export prices to gain 0.2 percent.