U.S. trade deficit up for third month running

WASHINGTON • The U.S. trade deficit widened in September as imports increased to the highest level in 10 months while exports slipped. The wider gap suggests growth was somewhat slower over the summer than previously estimated.

The deficit increased to US$41.8billion, up 8% from August, the Commerce Department said Thursday. It was the largest trade gap since May and marked the third straight month that the deficit has risen since hitting a four-year low in June.

Exports, which hit a record high in June, slipped for the third straight month, dipping 0.2% to US$188.9billion. Sales of commercial aircraft and autos both declined. Imports rose 1.2% to US$230.7-billion, the highest level since November.

The deficit with China hit an alltime high of US$30.5-billion.

The overall economy grew at an annual rate of 2.8% in the July-September quarter. An improving trade deficit contributed 0.3 percentage point to growth during that period.

But Thursday’s report shows that exports rose at a slower pace than the government estimated when it issued its report on third-quarter growth last week. That could wipe out trade’s contribution to growth, economists say, and lead the government to reduce its estimate of third quarter growth to an annual rate of 2.5%.

So far this year, the deficit is running 11.7% below the pace of 2012. A smaller trade deficit acts as a boost to economic growth when it shows American companies are earning more in their foreign sales and losing fewer domestic sales to foreign competitors.

Many economists say that growth has slowed in the current OctoberDecember quarter to perhaps below a 2% growth rate. They expect a rebound next year as the impact of this year’s tax hikes and government spending cuts lessen.

U.S. manufacturers are hoping that rising export sales will provide a boost to offset weakness in domestic demand. Through the first nine

America’s deficit with China … rose 1.9% to a record US$30.5-billion

months this year, exports are up a modest 1%. U.S. companies have had to deal with weakness in Europe, which has cut into sales in that important market. Through September, exports to the European Union were down 2.7% from the same period in 2012.

Imports are down 0.6% through September compared to the same period in 2012. Much of that decline reflects an 11.5% drop in petroleum imports. The U.S. is being helped on the energy front by rising U.S. production, which is lessening America’s dependence on foreign oil. The price of imported crude oil is also lower this year, averaging US$97.52 per barrel through September, down from US$102.25 for the same period in 2012.

America’s deficit with China, the largest with any country, rose 1.9% to a record US$30.5-billion in September and is up 2.6% for the first nine months of this year, on track to set another annual record.

The Obama administration on Oct. 30 released its latest report on whether countries are manipulating their currencies to gain unfair trade advantages.

The report said that China’s currency, the yuan, remained significantly undervalued but it declined to label China as a currency manipulator.