Trade Deficit Narrows in October
The U.S. trade gap narrowed in October as imports showed their steepest decline in almost two years, a sign the cooling economy is curbing the domestic appetite for foreign-made goods.
The $33.2-billion deficit followed a gap of $33.7 billion in September that was the widest on record, the Commerce Department said. Imports fell 1.6% to $124.4 billion after rising in September, the first decline since May and the steepest since imports fell 1.9% in December 1998. Exports also fell.
Federal Reserve policymakers announced Tuesday that “further economic weakness” is the greatest risk to the record-long U.S. expansion. While letting the overnight bank lending rate stand at a nine-year high of 6.5%, the result of six increases since June 1999, the Federal Open Market Committee stopped warning that inflation was the greater threat to the economy. That opens the way for a rate cut in 2001.
Exports fell 1.5% to $91.2 billion in October after a 0.2% decline a month earlier, the Commerce Department said. Still, that isn’t enough to keep the deficit from reaching a record this year.
The numbers show the effects of a dollar that has risen as much as 12% against a basket of currencies since December 1999. That has made U.S. exports more expensive, imports cheaper.
The trade deficit this year through October totaled $302.5 billion, up from $213.6 billion for the first 10 months of 1999, suggesting the annual shortfall will reach a record $363 billion, up from the previous record of $265 billion in 1999.
Today’s figures reflect declining two-way trade in aircraft, semiconductors, industrial engines and other capital goods, pointing to weakness in manufacturing.
Though imports of consumer goods rose to a record, the 0.3% increase followed a gain of 1.7% a month earlier. That still puts retailers at risk of holding excess inventories if consumer spending doesn’t pick up the week before Christmas.
Same-store sales fell 0.6% last week compared with a year earlier, the Bank of Tokyo-Mitsubishi Ltd. and UBS Warburg said. It was the third straight week-to-week drop. Storms in the Midwest and south-central U.S. damped demand, said Michael Niemira, a Bank of Tokyo-Mitsubishi economist. Wal-Mart Stores Inc. said Monday its sales in the seven days ended Friday were below forecast. Sears, Roebuck & Co. also reported slower sales.
The October deficit is still the second-largest ever, reflecting record trade gaps with Canada, China, Japan and the Organization of Petroleum Exporting Countries. The deficit with China widened to $9.1 billion, the largest trade shortfall ever with any single country, on record imports of $10.6 billion.
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U.S. Trade
The overall gap continues to reflect a deficit in the trade of goods and services. In billions of dollars:
*
October: -$32.2 billion
Source: Commerce Department
