Trade deficit declines in September on plunging oil prices

Posted Nov 13th 2008 11:50AM by Joseph Lazzaro
Filed under: International Markets, Forecasts, Economic Data

There have been few bright spots as the United States attempts to battle back from almost a decade of policy errors, but one positive trend continued Thursday: the trade deficit continues to decline.

The U.S trade deficit narrowed in September to $56.5 billion -- its smallest total in almost a year -- as the plunge in oil prices decreased the nation's bill for imported oil, the U.S. Commerce Department announced Thursday. Economists surveyed by Bloomberg News had expected the September trade deficit to total $57.0 billion. The trade deficit totaled $59.1 billion in August.

Imports fell a record $12.5 billion to $211.9 billion in September, while exports declined a record $9.9 billion to $155.4 billion. Further, during the past year, the real trade deficit has declined 19.7%, with real imports declining 6% and real exports dipping 2.3%.

Economist Peter Dawson said the major factor in the continued reduction in the U.S. trade gap is the plunge in oil prices, but U.S. consumer behavior also is playing a role.

"Oil had reached unsustainable levels, and now the oil market is correcting, so we will see remarkable declines in the nation's imported oil bill, but from historically high levels. That will continue to lower the trade deficit," Dawson said. "But the pull-back in spending by U.S. consumer also can be seen. Consumers have put away their wallets, and hopefully their credit cards, due to the recession. We will record a substantial decline in retail sales year-over-year in 2008 and because many of those products are imported, the trade deficit will decline further."

In September, imports of industrial supplies fell 11%, consumer goods declined 8%, and autos/auto parts fell 4%; capital goods increased 1%. Concerning exports, auto/auto parts fell 13%, food / feeds declined 11%, industrial supplies declined 11%, capital goods decreased 10%, and consumer goods fell 4%.

Economists generally prefer that a nation run a trade surplus as opposed to a trade deficit, as it usually implies that a nation's goods are competitive on the world stage, its citizens are not consuming too much, and that it's amassing capital for future investment and economic goals.

Economic Analysis: Oil tumbles, and it lowers the U.S. trade gap. Imagine how much lower the trade deficit would be if the U.S. developed alternate energy sources and increased auto fuel efficiency? The Obama Administration plans to do both, to point the nation toward what it should be doing: running a trade surplus.

Tags: exports, gdp, imports, inthenews, oil prices, trade, trade deficit, U.S. Commerce Department, U.S. economy

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Reader Comments (Page 1 of 1)

11-13-2008 @ 1:49PM

JCH said...

There are no bright spots in a recession.

There is no way out of this box. High oil prices mean economic health; low oil prices mean economic doom and despair. Those are the only futures that can exist.