U.S. trade deficit narrows, helped by lower oil prices

The U.S. trade deficit narrowed in September after hitting an all-time high, helped by lower oil prices, the Commerce Department reported Thursday. The imbalance with China, however, soared to a record as retailers stocked their shelves for Christmas.

The overall deficit declined 6.8% to $64.3 billion in September from a record $69 billion in August, the department said.

The drop of $4.7 billion was better than expected and represented the biggest one-month decrease in more than five years.

The improvement came from a 10.5% drop in America’s foreign oil bill, which fell to $26.3 billion. The volume of imports decreased and crude oil prices had a big decline. They now are about $60 a barrel after hitting $77 a barrel in the summer.

Analysts said the improvements should continue if oil prices do not surge again. But they cautioned against expecting any quick fix in a deficit still on track to set a record for the fifth straight year.

“There is little in this report to tell me that once we get past the petroleum effect, there are any basic changes in the trade situation,” said Joel Naroff, chief economist at Naroff Economic Advisers. “With the Congress changing hands, the political pressure on the administration to do something about China is likely to build.”

The deficit with China set a record of $23 billion in September. It is running at an annual rate of $228 billion this year, on pace to surpass last year’s $202 billion, which was the all-time high for any U.S. trading partner.

The big increase in September came from higher imports of Chinese cellphones, televisions and toys as U.S. retailers stocked up for Christmas.

Democrats will be taking over the House and Senate as the result of Tuesday’s election, and many had criticized the Bush administration during the campaign for not doing enough to protect American workers from unfair foreign trade practices. China often was singled out.

“Clearly, the U.S. needs a serious review of its trade policy,” Rep. Sander M. Levin (D-Mich.) said Thursday. “The ‘hands-off, anything goes’ trade policy employed by the Bush administration has not worked.”

Rep. Nancy Pelosi (D-San Francisco), expected to become the new speaker of the House, has been an outspoken critic of China’s human rights record; other Democrats are pushing legislation that would penalize China unless it lets its currency rise in value against the dollar as a way of making U.S. products more competitive in China.

In other economic news Thursday, the number of people in the U.S. filing claims for unemployment benefits fell by a better-than-expected 20,000 last week to 308,000, indicating that employers are still resisting widespread layoffs even as the economy slows.