September Trade Gap Edges Down Slightly
The U.S. trade deficit edged down in September but was still the second-highest level on record and was worse than economists expected, while higher energy costs pushed up consumer prices in October, government reports on Tuesday showed.
The September U.S. trade deficit shrank just 0.7% to $38.03 billion from the record of $38.28 billion set in August, the Commerce Department reported. But for the first nine months of this year the deficit hit a new high, probably setting the stage for the worst U.S. trade performance on record.
Meanwhile, consumers were hit by the biggest energy price increase in six months, according to the Labor Department.
In its latest report, the department said a 1.9% rise in energy prices accounted for half of the overall October 0.3% advance in the consumer price index, the government’s closely watched gauge of inflation.
Excluding volatile food and energy prices, the CPI was up a moderate 0.2%, leaving economists with little worry that inflation would be getting out of control.
“Inflation is not a problem, but it is not completely tame,” said Joel Naroff of Naroff Economic Advisors in Holland, Pa.
Though the September trade deficit was a slight improvement over the previous month, the near-record figure renewed concerns that such a trade imbalance could trigger a sharp fall in the dollar, which already has declined 15% this year on a trade-weighted basis.
Commerce Department Undersecretary Kathleen Cooper said the data would not have a big effect on third-quarter gross domestic product.
The next estimate for the third quarter is scheduled to be released next week.
“I don’t think the data that came out today will make much of a change at all,” she said, adding that higher oil prices, caused by concern about a possible war with Iraq, continue to be a drag on the economy.
The latest monthly trade deficit tally exceeded the average estimate of $37.33 billion made by analysts surveyed before the report.
Many economists were expecting imports to take a bigger tumble in September after a jump in August as companies stockpiled goods in anticipation of a dockworkers strike on the West Coast.
Ports were closed the last two days of September and the first eight days of October because of a labor dispute between dockworkers and port operators.
However, imports totaled $120.19 billion in September, down just 0.5% from the year-to-date high of $120.78 billion in August.
Exports, which rose steadily in the first half of 2002, declined for the second consecutive month in September to $82.16 billion, down 0.4% from August, as the global economy struggled.
Economists said stockpiling ahead of the port labor dispute could lead to narrowing of the trade deficit in coming months.
“To the extent that August and September involved some front-loading ahead of the dockworkers’ ... [lockout], I would assume the trade deficit in October is going to be quite a bit narrower,” predicted Ram Bhagavatula, chief economist with Royal Bank Scotland Financial Markets in New York.
