U.S. Trade Gap Shrinks as Exports Grow

China, oil deficit still high

The U.S. trade deficit shrunk to $57.6 billion in August, as rising exports offset higher costs for imported oil, the Commerce Department reported on Oct. 11 The lion's share of the deficit came from oil imports and from China, but excluding those factors, the trade balance showed improvement.

Adjusted for inflation, it was the lowest level since February 2004, and in absolute terms the lowest since January, Commerce Department figures showed.

The trade gap was also better than the average analyst expectation of a deficit of $59.5 billion, and marked a 2.4% drop from July's revised figure of $59 billion. Exports rose 0.4% in August to a record $138.3 billion, helped by the weak dollar. Imports meanwhile fell 0.4% to $195.9 billion.

Oil prices remained a big factor in the deficit, accounting for $24.3 billion of the deficit, with the average price of an imported barrel hitting a record $69.09.

The other big factor in the deficit was China, which accounted for $22.5 billion of the deficit even though the figure was down 5.4% for the month.

The improvement in the trade deficit is generally positive for the economy since it means more economic output is coming from domestic sources. It also eases pressure on the dollar by reducing outflows of the U.S. currency.

Copyright Agence France-Presse, 2007

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