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News > Economy
Trade deficit hits record
December 16, 1999: 1:06 p.m. ET

October imports from Asia push gap to $25.9B; Philly Fed index declines
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NEW YORK (CNNfn) - The U.S. trade deficit widened to a record $26 billion in October, fueled by rising oil imports and a record volume of goods and services coming into the country from the Far East, the government reported Thursday.
    In separate reports, the Philadelphia Federal Reserve said its index of regional manufacturing activity slipped in December from November, while the Labor Department reported that weekly jobless claims plunged to their lowest level in 26 years.
    October’s trade gap topped both the $24 billion deficit economists had expected and August’s revised $24.2 billion deficit. The Commerce Department said imports surged to a record $107.9 billion, while exports declined for a second straight month to $81.9 billion.
    October’s surging imports and stagnant exports are yet another indication of Americans’ voracious appetite for imported goods and services -- a reflection of an economy about to enter its ninth year of uninterrupted expansion, economists said.
    At the same time, swelling imports could potentially weigh on U.S. manufacturing, resulting in slower economic output in the final three months of the year as products and services make their way off boats and planes and not off U.S. assembly lines.
    Because trade figures lag other economic indicators, the effect of swelling imports on the U.S. economy will not be known until early next year.
    
Clearly not expected

    "It clearly wasn't expected,” said Jay Bryson, international economist with First Union Corp. in Charlotte, N.C. "It's not great news because it shows that U.S. domestic demand is very strong. That's not a sustainable situation.”
    Bond investors chose to go with the strong-growth scenario, with the benchmark 30-year Treasury holding its losses. The currency, too, reacted negatively to the numbers as traders concluded that more U.S. dollars are heading out of the country to buy imported goods, lessening the currency’s value.
    
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    Click above for the Commerce Department’s summary of October’s trade figures
    The U.S. economy is "supplying the world with demand and supplying the world with U.S. dollars to pay for that stuff, and sooner or later they are going to get filled up with dollars and start selling,” said Charles Lieberman, chief economist with First Institutional Securities. "When they do the U.S. dollar is going to be in a lot of trouble.”
    In the first 10 months of 1999, the trade deficit totaled $218.4 billion, up significantly from the $135.4 billion recorded during the first 10 months of last year. At its current pace, the trade shortfall has already topped last year's record of $164.3 billion and should ring in around the $262-billion mark, according to economists’ estimates.
    
Japan deficit widens

    As imports surged, the deficit with Japan overtook the one with China, ringing in at $7.18 billion. It was the nation’s largest deficit with any country on record. The trade gap with China rose to $7.15 billion, up from $6.9 billion in the previous month.
    The trade deficit with major oil producing countries
    declined to $2.7 billion from $3 billion in September. But the October price per barrel of crude petroleum rose to $20.74, the highest since January 1997 when the price was $21.86, the report said.
    The trade gap with Western Europe surged to $5 billion compared with $3.5 billion in September. The deficit with Canada -- the country’s largest trading partner -- rose to $3.2 billion from $2.8 billion in the previous month. The deficit with Mexico slipped to $1.4 billion from $2.2 billion in September.
    The overall goods deficit totaled $32 billion in October, while the services surplus remained unchanged at $6.1 billion. Exports of services increased to $23.2 billion from $23.1 billion and imports of services increased to $17.2 billion from $17.0 billion.
    
Philly Fed weakens

    Offsetting the trade figures was the Philadelphia Fed's business activity index, which declined surged to 8.6 in December from 15.8 in November - an indication that U.S. business activity tapered off in the final month of the year.
    The index of economic activity expected six months in the future rose to a nine-month high of 29.8 in December from 17.8 in November. The new orders index declined to 8.9 from 20.3 while the shipments index fell to 6.0 from 27.6, the report said. The index measuring the number of workers on factory floors declined to 12.8 from 13.6 last month.
    "These data suggest that the recovery in the manufacturing sector may be more narrowly based than previously thought, although year-end concerns may be imparting for distortions into the data,” said Steven Wood, an economist with Banc of America Securities in San Francisco.
    The index is compiled by surveying conditions at approximately 150 different factories in eastern Pennsylvania, southern New Jersey and Delaware.
    
Jobless claims plunge

    In other economic news, the Labor Department said Thursday the number of Americans filing first-time claims for state unemployment benefits fell to the lowest level in 26 years.
    Initial jobless claims fell to 266,000 for the week ended Dec. 11 from a revised 295,000 the prior week. A consensus of analysts compiled by Briefing.com had forecast 290,000 first-time claims.
    The four-week moving average, which generally provides a more accurate picture of jobless trends, slipped to 282,000 from a revised 287,250.
    The numbers signaled to financial markets that the red-hot labor market is showing few signs of cooling off, since few people are requiring any kind of social assistance due to lack of employment.     Back to top

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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.