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Friday, October 10, 2008

Trade Deficit Shrinks in August as Oil Prices Slide

FOXBusiness

The U.S. trade deficit narrowed in August, led by lower crude oil imports.

The Commerce Department said Friday the U.S. trade deficit narrowed to a higher than expected $59.1 billion, as petroleum imports declined. However, U.S. exports slipped by 2% because of slowing global demand, which somewhat offset the gains made from lower imports.

The shrinking trade deficit is a positive indicator, but many economists believe foreign trade will not sufficiently bolster economic growth.

"Trade will make another large contribution to growth in the third quarter, perhaps enough to keep GDP growth positive," Global Insight chief U.S. economist Nigel Gault said.

"However, with global credit markets now frozen and stock markets crashing, the U.S. can no longer look to foreign trade to prevent what is shaping up as a severe recession."

Import prices overall fell by 3% in September, as petroleum import prices sunk 9% and non-petroleum import prices inched lower by a 0.9%, the Labor Department said in a separate report. An interesting implication of the report is that falling import prices could be a sign that inflation pressures are moderating.

"To be sure, the recent declines in commodity prices combined with lower shipping costs should also soon help to alleviate pressures in the PPI," a measure of wholesale inflation, said Deutsche Bank Chief U.S. Economist Joseph A. LaVorgna in a research note.