U.S. Trade Deficit Falls 30% in October
Record exports helped shrink the U.S. trade gap dramatically in October, the Commerce Department said Thursday, largely overshadowing mounting bilateral deficits with Japan and China.
The deficit contracted 30.2% to $7.99 billion from a revised $11.44 billion in September--the lowest monthly shortfall since $7.87 billion in March.
Exports of all types of goods and services grew 4.2% in October to a record $71.74 billion, and total imports declined 0.7% to $79.72 billion.
Foreign sales of American-made commercial aircraft hit a 2 1/2-year peak in October, and imports of cars and parts tumbled $1 billion, primarily because of a strike in Canada against General Motors Corp. The strike has since been settled.
“The 30% monthly improvement is clearly overstated because of these special factors,” said economist Sung Won Sohn of Norwest Corp. in Minneapolis, adding that the prospects were for a deterioration in the trade picture ahead.
“Over the next few months, the strong dollar is going to play havoc with trade,” Sohn warned. “My other major concern is oil because demand is going up, the price is going up, inventories are low and we’ll be importing more of it.”
The cost of imported crude petroleum rose to $4.81 billion in October from $4.77 billion in September, even though the number of barrels imported declined.
The reason was that the price per barrel of imported crude climbed to $21.38--the highest since January 1991 during the Gulf War against Iraq--from $20.02 in September. On Wednesday, the price of crude jumped past $26 a barrel.
Some analysts said the U.S. economy was expanding at a steady, moderate pace that drew in imports, whereas those of the U.S.’ chief trading partners--Japan and Western Europe--were mired in a slow rate of growth that made them poor export markets.
“Large trade deficits will persist until the economies of our trading partners begin to match U.S. performance and the dollar is allowed to settle at a rate determined by market forces rather than foreign intervention,” said Marino Marcich of the National Assn. of Manufacturers.
In October, the politically sensitive deficit with Japan shot up by 30.9% to $4.96 billion, the highest level since $5 billion in August 1995.
Once again, that made Japan the country responsible for the largest single part of the U.S. trade deficit. It barely surpassed the $4.90 billion deficit with China, however.
Even so, the department noted that the monthly deficit with China rose for a seventh straight month, which is likely to aggravate trade tensions. Imports from China hit a record $5.8 billion.
The department said the most important reason for the rising deficit with Japan was a rise in imports of cars and parts.
U.S. Trade
The overall trade deficit fell in October; in billions:
Oct. 1996: -$7.99
Source: Commerce Department
