Trade Deficit Narrows in August
A decline in energy prices helped narrow the U.S. trade deficit in August for the first time since April as shortfalls with Canada, Mexico, Europe and Japan all contracted, the government said Thursday.
The Commerce Department said August’s trade deficit contracted to $29.44 billion from $31.69 billion in July as the rise in U.S. exports far outpaced the increase in imports.
It was the smallest shortfall since February, when it stood at $27.48 billion, and was under the $31.76 billion forecast by economists in a Reuters poll.
The deficit was helped by falling oil prices: The U.S. imported more petroleum in August than it did in July, but the cost per barrel dropped to $26.59 from $27.76.
Another factor was recovering economies in Europe and elsewhere, which could continue to have an effect in the months ahead.
“Much more important than currency values, in terms of driving exports, is economic growth,” said James Annable, chief economist at WingSpanBank.com.
“The real story on trade is that economic growth has picked up sharply at the lion’s share of our trading partners. Southeast Asia and Latin America are growing very rapidly again and Europe, despite some recent slowdown with oil prices, has moved up to a different level of growth,” he said.
Economists said the latest data, coupled with earlier reports, support the notion that although the pace of U.S. economic growth slowed in the third quarter, it probably will pick up steam again in the final three months of the year.
In a separate report Thursday, the Labor Department said the number of Americans applying for first-time jobless benefits dipped by 7,000 in the latest week, suggesting that employment prospects remain bright for U.S. workers.
The Commerce report showed that the deficit with western Europe declined by 28% to $5.19 billion from $7.22 billion in July. The deficit with Canada dipped to $4.51 billion from $4.57 billion.
The deficit with Mexico dipped 14% to $1.88 billion from $2.19 billion, and the deficit with Japan dropped 10% to $6.76 billion from $7.52 billion.
Exports rose to a record $93.02 billion, up 3.6% from July’s $89.80 billion. Imports rose more modestly to $122.46 billion, up less than 1% from $121.49 billion in July. Exports were boosted by record sales of industrial supplies, capital goods and automobiles and related parts.
Peter Kretzmer, senior economist at Banc of America Securities, viewed the report as encouraging.
“Capital spending and household spending are likely to be commensurately slower, so I think what we are heading toward is a more balanced growth picture where domestic demand is a little bit weaker but export growth is making more of a contribution,” Kretzmer said.
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U.S. Trade
The overall gap continues to reflect a deficit in the trade of goods and a surplus in services. In billions of dollars:
August: -$29.4 billion
Source: Commerce Department
