U.S. Trade Deficit Held in Check for July
U.S. consumer prices rose slightly in August while the trade gap in July was lower than expected, the government said Thursday in reports that economists said made an unconvincing case for a Federal Reserve Board interest rate cut.
Cheaper Asian goods and the lowest crude oil prices in 12 years helped keep the U.S. trade deficit in check at $13.92 billion in July, 2.1% higher than the revised $13.64-billion gap in June, the Commerce Department said.
The July deficit was down sharply from a May peak of $15.77 billion and well below economists’ expectations of a trade gap topping $15 billion.
The department said exports fell 1.3% to $75.42 billion in July, while total imports fell a slight 0.8% to $89.34 billion.
The services surplus rose by 1.9% to $7.02 billion, while the deficit in goods trade rose 2% to $20.94 billion, the department said. The United States typically runs a surplus in services trade and a deficit in goods trade.
The consumer price index--the nation’s main inflation gauge--rose by a seasonally adjusted 0.2% last month, the same as in July, bringing the annual rate of inflation to 1.6%, the Labor Department said. Higher apparel prices were almost offset by a decline in gasoline costs.
In a separate report, the Labor Department said new claims for unemployment benefits fell by 15,000 to 299,000 in the week ended Sept. 12 from a revised 314,000 in the previous week, in a sign that the job market remained tight.
Economists said the trade data gave mixed signals while the consumer price report did not make a convincing argument for the Fed to cut short-term interest rates.
Norwest Corp. economist Don Hilber said the consumer index did not reflect the same declines as reflected in last week’s producer price report that showed wholesale prices falling 0.4% in August.
“In order for the Fed to get more confident that inflation is falling, they would almost have needed a consumer price report that would have done the same type of thing as the producer price report,” Hilber said.
In recent days, Federal Reserve Board Chairman Alan Greenspan has expressed concern about the possible effects of the financial crisis in Asia and Russia that now threatens parts of Latin America on the U.S. economy.
Some analysts had suggested that the major industrial nations might be ready to lower interest rates in an effort to boost global growth, but Greenspan said on Wednesday no such coordinated move was in the works.
But the Asian crisis and possible economic problems in Latin America are likely to cause the U.S. trade picture to deteriorate further, economists said.
“We see further evidence of the deterioration in the U.S. exports picture as a result of the further deterioration of the situation in Asia, with no end in sight,” said David Resler, managing director at Nomura Securities International.
Shapiro said that when annualized, the trade data so far this year show a $159-billion deficit, compared with $110 billion in 1997.
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Consumer Price Index
Monthly percentage change, seasonally adjusted:
1998, August: +0.2% * Source: Bureau of Labor Statistics
