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Posted: 10/11/2007 5:52:25 AM EDT

Trade Deficit Improves Significantly
Thursday October 11, 9:12 am ET
By Martin Crutsinger, AP Economics Writer  
Record Exports Help Push Trade Deficit to Lowest Level in 7 Months

WASHINGTON (AP) -- The U.S. trade deficit fell to the lowest level in seven months, helped by record-high sales of American products and the declining value of the dollar. The deficit with China declined as imports edged down slightly following a string of high-profile recalls.
The Commerce Department reported Thursday that the deficit declined to $57.6 billion in August, down 2.4 percent from the July imbalance. It was lowest gap between exports and imports since January and a much better showing than had been expected.

The improvement reflected a 0.4 percent rise in exports, which climbed to a record $138.3 billion. Sales of farm products including wheat, soybeans and corn, and exports of industrial products such as chemicals and steel both hit record levels.

Imports actually dropped by 0.4 percent to $195.9 billion, reflecting lower shipments of foreign cars and furniture, which offset a big increase in the foreign oil bill, which rose to the highest level in a year.

In other economic news, the Labor Department said that the number of newly laid off workers filing claims for unemployment benefits fell by 12,000 last week to 308,000. That was a better showing than had been expected.

The nation's big chain retail stores reported disappointing results in September as lingering summer weather and the severe housing slump dampened consumers' desire to shop. The biggest losers included apparel sellers. Wal-Mart Stores Inc. reported a modest sales gain, but the increase was below analysts' expectations.

The politically sensitive trade deficit with China fell by 5.3 percent to $22.5 billion. U.S. exports were up, led by increased sales of aircraft and soybeans, while imports slipped a slight 0.7 percent. The decline in imports occurred after a series of recalls of tainted products from toys with lead paint to toothpaste and unsafe tires.

However, the small drop came in such areas as computers and furniture, where there have not been highly publicized recalls. Imports of toys from China actually rose as American retailers stocked their shelves for Christmas.

The boom in U.S. exports is helping to cushion the U.S. economy from the adverse effects of the housing bust and a severe credit crunch. Overseas demand for U.S. goods is being helped by a falling value of the dollar against many other currencies. That development pushes up the cost of foreign vacations and imports for American consumers but makes U.S. products cheaper in foreign markets.

Through the first eight months of this year, the trade deficit is running at an annual rate of $708 billion, down 6.7 percent from last year's imbalance of $758.5 billion, which had been the fifth consecutive record deficit.

President Bush's critics still contend that his trade policies have been harmful to the United States, resulting in record-high deficits for most of his time in office and contributing to the loss of 3 million manufacturing jobs since January 2000.

Trade critics have focused their unhappiness on China, where the deficit is on track to set another record, running at an annual rate of $246 billion. That would be the largest imbalance ever recorded for a single country.

Lawmakers are pushing a variety of bills that would punish China for what they see as unfair trade practices such as manipulating its currency to keep its value low against the dollar as a way of boosting Chinese imports and making it harder for American companies to sell their products in China.

The Bush administration, led by Treasury Secretary Henry Paulson, contends that such measures would be counterproductive, prompting China to retaliate against American goods. They argue that high-level diplomatic talks offer the best chance of resolving trade differences between the two nations.

For August, America's foreign oil bill rose by 0.8 percent to $27.5 billion, the highest level since last August. The average price for a barrel of imported crude oil jumped to a record high of $68.09. Analysts are predicting that figure will climb higher in coming months given that oil prices have recently hit all-time highs above $80 per barrel.

America's trade deficit with Mexico jumped 23.6 percent to a record of $6.9 billion while the deficit with Canada, the country's biggest trading partner, edged down 6.6 percent to $5.3 billion. The deficit with the European Union fell by 21.1 percent to $10.2 billion while the imbalance with Japan dropped 16 percent to $6.7 billion.

Link Posted: 10/11/2007 12:44:45 PM EDT
TTT for the afternooners....
Link Posted: 10/11/2007 12:46:40 PM EDT
This happens when you devalue your currency.
Link Posted: 10/11/2007 12:49:00 PM EDT

I know my company is exporting a lot more because the cheap dollar is just like a price cut to our Euro customers.

But I think that would be eclipsed by the high oil prices. Maybe the US has decreased consumption or increased domestic production. Colorado is drilling everywhere for oil.
Link Posted: 10/11/2007 12:51:37 PM EDT
Good. It is a trend that needs to continue. I'm not going to jump up and down about a .4% rise in exports though. We still have a huge deficit.
Link Posted: 10/11/2007 12:55:36 PM EDT
[Last Edit: 10/11/2007 12:57:24 PM EDT by sc_beerbarge]
Fed cuts rate, US $ falls.
The lower the US Dollar falls, the more people buy our products? US$ = Canadian $ right now, that's really sad.
Is there more to it than that?

I for one have gone out of my way to avoid Chinese products, but the article says Chinese imports rose last month.

The part I like in stories like these, is that when our economy rivals that of Pakistan our import woes will be over.
But they'll write the story "Trade Deficit Finally Defeated"

Link Posted: 10/11/2007 1:57:36 PM EDT
[Last Edit: 10/11/2007 1:57:45 PM EDT by HeavyMetal]
Link Posted: 10/11/2007 2:01:49 PM EDT

Originally Posted By Cabby:
This happens when you devalue your currency.

Uhm, I'm not seeing the problem here...
Link Posted: 10/11/2007 2:14:28 PM EDT
Link Posted: 10/11/2007 5:16:38 PM EDT

Originally Posted By HeavyMetal:

Originally Posted By swiseuf:
To me the funny thing is that the same people who complain about devaluation and increased exports, are the same ones bitching about US jobs going overseas.  Pretty ironic....

That's because they have zero comprehension of economics.  

I agree.  Thats why I will continue to post positive economic news here to balance the negativity that some like to spew.
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