US trade gap up 8.5 percent to $40.3 billion

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The Commerce Department Tuesday reported that the U.S. trade deficit widened in April, as demand for foreign cars, cell phones and other imported goods outpaced growth in U.S. exports. (Photo: Employees fit a tire to a John Deere W540 combine inside the company's Domodedovo manufacturing center near Moscow, Russia.)

The U.S. trade deficit widened in April, as demand for foreign cars, cell phones and other imported goods outpaced growth in U.S. exports.
    
The Commerce Department said Tuesday that the trade gap rose 8.5 percent in April from March to $40.3 billion.
    
Exports increased 1.2 percent to $187.4 billion, the second-highest level on record. Companies sold more telecommunications equipment, industrial machinery and airplane parts, while U.S.-made autos and auto parts also rose to an all-time high of $12.8 billion.
    
But imports grew an even faster 2.4 percent to $227.7 billion. Sales of foreign cars increased to $25.5 billion. Americans also bought more consumer goods, led by big gain in foreign-made cell phones.
    
The report showed a weaker global economy continues to reduce demand for U.S. exports. That's likely to weigh on growth in the April-June quarter.
    
A wider trade gap can restrain growth because it means U.S. consumers and businesses are spending more on foreign goods than U.S. companies are taking in from overseas sales.
    
Europe's recession continues to be a problem for U.S. companies. The deficit with the 27-nation European Union grew 25.6 percent to $12.4 billion. U.S. exports to the region declined 7.9 percent, while imports from the region rose slightly.
    
The politically sensitive deficit with China surged to $24.1 billion, the highest level since January and the largest with any single nation. Imports jumped 21 percent, while exports fell 4.7 percent. The March deficit had been artificially lowered by shipping disruptions caused by the Chinese New Year holiday.
    
The April deficit with South Korea climbed to a record $2.4 billion. Imports from that country rose to an all-time high of $5.6 billion.
    
Fewer exports have slowed activity at American factories, according to a measure of U.S. manufacturing released Monday.
    
The Institute for Supply Management said Monday that its index of manufacturing activity fell to 49 last month from 50.7 in April. It was the lowest reading since June 2009 and the first time the index had slipped below 50 since November. A reading under 50 indicates contraction in manufacturing.
    
A measure of export orders in the ISM report fell to its lowest level since January.
    
The weakness abroad has coincided with less investment in the U.S., as businesses have also held back, possibly out of concern that government spending cuts could hobble economic growth.
    
The U.S. economy grew at an annual rate of 2.4 percent in the January-March quarter. Many economists think growth is slowing in the April-June quarter to an annual rate of around 2 percent.
    
The deficit so far this year is running at an annual rate of $491.9 billion, down 8 percent from the revised annual deficit of $534.7 billion for 2012.

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