Trade Gap Shrinks to $14.19 Billion
A jump in farm exports helped narrow the U.S. trade gap in October to its lowest level in several months despite record imports, the Commerce Department said Thursday.
The trade deficit unexpectedly shrank to $14.19 billion from $14.37 billion in September as imports of goods and services rose 2.2% to a record $93.81 billion. Exports were up 2.8% at $79.62 billion, the department said.
It was the second monthly decline in the deficit in a row and brought the trade gap to its lowest level since April.
Wall Street analysts had expected the Asian financial crisis to drag down U.S. exports and predicted the October deficit would rise to $15.1 billion.
“Obviously it was a better reading on the trade front than expected,” said Kevin Flanagan, an economist with Morgan Stanley Dean Witter. “We would not expect this to be a renewed trend. The last two months are probably an anomaly in the trend toward higher deficits.”
The October deficit was consistent with recent trade trends, said Ken Mayland, chief economist with KeyCorp, a Cleveland-based financial services company. Mayland noted that the U.S. trade gaps with Japan and China “remained at gargantuan proportions” and would likely invite a policy review.
“The October trade figures display no new trends, just extensions of previously entrenched tendencies,” he said.
The deficit with Japan rose sharply to $5.97 billion from $5.07 billion in September and was the highest since March 1995, the agency said. The deficit with China declined to $5.54 billion from $5.9 billion in September in the face of record imports and exports.
U.S. officials, looking at record trade deficits this year and next, are fretting about the persistently huge gaps with Japan and China. The deficit with Japan is expected to top $60 billion this year, in the face of an 11% decline in U.S. exports to that country so far this year.
The gap with China is likely to be a close second to Japan.
October’s record imports primarily reflected increases in imports of cars and parts as well as civilian aircraft and engines, the department said. The rise in exports was aided by a big surge in sales of soybeans and wheat.
The trade gap with the European Union nearly doubled in October to $3.24 billion.
The U.S. trade deficit with its North American Free Trade Agreement partners was also higher. The deficit with Canada rose to $2.24 billion from $2.19 billion as imports hit a record high of $15.9 billion. The deficit with Mexico rose to $1.71 billion from $1.45 billion.
The deficit with OPEC was also up in the face of higher prices and volumes of imports. The deficit rose to $1.02 billion in October from $853 million in September. The average price for a barrel of crude oil rose to $11.59 from $10.98 in September, while crude imports rose to 9.1 million barrels per day from 8.23 million barrels per day in September, the department said.
Analysts said a November slide in oil prices will likely reverse that October increase.
Separately, the Labor Department reported the number of Americans filing first-time applications for state unemployment benefits plunged by 31,000 last week.
Initial jobless claims--which give an early reading on the resilience of the labor market--fell to 296,000 in the Dec. 12 week from 327,000 in the prior week, the Labor Department said.
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Trade Deficit
The overall gap continues to reflect a deficit in the trade of goods and a surplus in services. In billions of dollars:
October: -$14.19 billion
Source: Commerce Department
