September Trade Numbers Are Positive -- And Misleading

By John S. McClenahen U.S. exports have not suddenly become more competitive in world markets. Nor has the U.S. dollar decreased dramatically in value. Rather, September's stunning $8.4 billion decline in the U.S. goods and services trade deficit to $18.7 billion from August's $27.1 billion was a result of one of those fabled nonrecurring items. In this case, on the services side of the ledger, reinsurance claims associated with the Sept. 11 attacks on New York and Washington lowered the level of U.S. imports in September by $11 billion, says Maury Harris, chief U.S. economist at UBS Warburg LLC, New York. "Excluding that transaction . . . the trade gap actually widened from $27.1 billion to $29.7 billion," Harris figures. The U.S. trade deficit in goods grew by $1.8 billion between August and September, "worse than initially assumed in the third-quarter GDP report," notes Gerald D. Cohen, a senior economist at Merrill Lynch & Co., New York. Indeed, in September there were lots of minuses among U.S. exports as foreign demand dampened for manufactured products. Capital goods, industrial supplies and materials, consumer goods, and autos all posted declines of at least $300 million, reports the U.S. Commerce Dept.'s Bureau of Economic Analysis. "Based on [the] data, we now believe third-quarter GDP will be revised down to a 1.5% decline from the originally reported 0.4% decline," says Cohen.

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