US trade gap expected to edge down slightly in September; 5th straight monthly decline likely

Economic IndicatorsAssociated Press

The Commerce Department reports on the U.S. trade deficit for September. The report will be released Tuesday at 8:30 a.m. Eastern.

SMALLER DEFICIT: Economists believe the trade deficit narrowed slightly in September to $40 billion, according to a survey by data firm FactSet. This would represent a modest decrease from $40.1 billion in August. It would also mark the fifth consecutive monthly decline, bringing the trade deficit down to its lowest level since $39.2 billion in January.

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EXPORTS AND IMPORTS: Both exports and imports increased in August, suggesting increased spending by consumers and businesses. That signals potential economic growth in the second half of the year. When exports rise faster than imports, the trade gap shrinks and gross domestic product can get a boost.

The trade gap has been tempered this year by the boom in U.S. energy production, which has reduced dependence on foreign oil and increased U.S. petroleum exports. So far this year, petroleum exports are 16.9 percent above the level of a year ago, putting the country on track for a record high.

Still, economic slowdowns in Europe and China may hurt demand for American-made goods. Since September, the dollar has appreciated in value more than 4 percent against the euro, to $1.25, making U.S. products less competitively priced abroad.

The politically sensitive trade deficit with China fell 2.2 percent to $30.2 billion in August, only slightly below the all-time high of $30.9 billion set in July. The deficit with China is on track to set another record for the entire year, creating more pressure for Congress and the Obama administration to take steps to curb what critics call unfair trade practices in China.

U.S. manufacturers say that China is manipulating its currency for a trade advantage. They say China undervalues the yuan to make the goods it manufactures cheaper when they are exported, and American products more expensive in China.

Through August, the trade deficit totaled $335.2 billion, compared to $321.7 billion for the same period last year. For all of 2013, the deficit totaled $476.4 billion, 11.4 percent lower than in 2012. Many economists believe the trade deficit will rise slightly in 2014, as a stronger U.S. economy is drawing in more imports.

The trade deficit would be a modest drag on overall growth. That's because U.S. producers are selling less abroad compared to foreign companies.