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Thursday, November 13, 2008

U.S. Trade Deficit Shrinks 4.4% to $56.5B in September

By Adam Samson

FOXBusiness

The gaping U.S. trade deficit shrunk somewhat in September, but the underlying trend is dim.

The Commerce Department said Thursday the trade deficit fell to $56.5 billion in September from $59.1 billion in August. This “deficit” number is simply derived by subtracting the value of exports by the number of imports.

The decline was mostly led by the precipitous fall in oil prices and imports. Indeed, if oil is removed from the equation, the trade deficit actually widened slightly.

The trade deficit, or so-called “net exports,” is a component of the quarterly GDP report, so this measure directly affects economic growth readings.

“If we look out over the next twelve months, both export and import volumes will drop – meaning not just slower growth, but outright declines - as the global recession reduces trade activity,” IHS Global Insight Chief U.S. Economist Nigel Gault wrote in a research note.

Echoing Gault’s concern, JPMorgan Economist Abiel Reinhart added: “September does not appear to have been a good month for exports, which is likely a sign of things to come.”

Reinhart did, however, note that there were several unusual factors that made the September reading tricky to analyze. Among them was the Boeing (BA) strike, which hurt airplane exports and hurricanes that cut off access to some Gulf Coast ports.

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