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Trade gap slims
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November 18, 1998: 10:39 a.m. ET
U.S. trade deficit for September is $14B, better than expected, but still high
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NEW YORK (CNNfn) - The U.S. trade deficit in September was far smaller than economists predicted, but still hovered around record highs as the effects of the Asian economic crisis continues washing up on domestic shores.
The Commerce Department reported Wednesday that the trade gap, which measures the monthly excess of imports over exports, fell to $14.03 billion for the month, from a revised all-time high of $15.9 billion in August.
Economists had forecast a September trade gap of roughly $16 billion.
The 30-year U.S., Treasury bond, in response to the news, rose 8/32 of a point for a yield of 5.28 percent.
In September, U.S. exports jumped 2.3 percent to $77.13 billion, boosted chiefly by record sales of civilian aircraft and heavy exports of automotive vehicles, parts, and engines parts. Imports shrank by 0.2 percent to $91.16 billion.
Civilian aircraft sales soared to $4 billion, helping to boost the sales figure for capital good shipped abroad to $26.12 billion.
But despite the smaller-than-expected shortfall, those tracking the economy say they do not expect the trade gap to begin a course of recovery.
In the first nine months of the year, the shortfall swelled to $123.1 billion -- 50 percent higher than the gap in the comparable 1997 period.
"This is still very large and probably not indicative of a turnaround in the trade deficit," said Salomon Smith Barney analyst Douglas Schindewolf. "The widening of the trade deficit is a drag on economic growth. …We are still far from out of the woods on this front."
Since this spring, the manufacturing sector has born the brunt of the Asian economic crisis
Schindewolf said the unemployment rate is expected to rise to around 5 percent to 5.5 percent next year alongside a broader economic slowdown. But, he predicted, the U.S. economy will not slip into recession.
"We think we'll see more of a soft landing [next year]," he said. "It's a very tough environment in terms of corporate earnings. It's a very competitive pricing environment, labor costs are rising. We think that will continue and probably will weigh on capital spending going forward."
The trade deficit with China in September remained the largest of any of the nation's trading partners. But that gap declined marginally to $5.9 billion from $5.91 billion in August, according to the data, which are not seasonally adjusted.
U.S. imports from China climbed to a record level, reflecting, in part, large shipments of toys that usually occur around September in advance of the Christmas season.
The trade shortfall with Japan fell as did the deficit with Western Europe.
But the bilateral gap with Canada widened substantially.
Delos Smith of the Conference Board said the interest-rate cut by the Federal Reserve will help Asia and other emerging-market countries regain their economic footing, which in turn will lead to a better balance between exports and imports.
"That's the reason why they have the rate cut," he said. "I don't think it's really for the domestic economy at all. It's for the rest of the world. Lower interest rates help because it takes off some of the pressure."
Smith also noted that Asia is beginning to stabilize, the first step toward the road to recovery. But he added the country still has a long way to go before its economy once again resumes an even balance of exports and imports.
--by staff and wire reports
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