US trade deficit increases in September

05 November 2014

US trade deficit increased in September, as its exports fell due to a broader global economic weakness. According to the Commerce Department, US trade deficit increased 7.6 per cent to $43 billion in September, marking the first increase in four months.

Economic slowdown in Europe and China appeared to have hit demand for US-made goods. An appreciation of the value of the dollar by over 4 per cent against the euro to $1.25, also made US products less competitively priced abroad.

Exports were down 1.5 per cent to $195.6 billion, led by lower shipments of industrial supplies, consumer products and capital goods such as engines and computers.

September imports continued to remain steady at $238.6 billion for the second straight month.

The trade gap had been tempered this year by the boom in US energy production, which had cut dependence on foreign oil and increased US petroleum exports. So far this year, petroleum imports were 7.6 per cent below the year-ago level. The decline had partly come from falling oil prices, with crude imports costing 3.1 per cent less so far this year.

The politically sensitive trade deficit with China increased 17.6 per cent to $35.6 billion in September, an all-time high. According to commentators, the release of the new Apple iPhone had fueled much of the 12.7 per cent rise in imports from China, just as growth in that economy had slipped and caused US exports to decline 3.2 per cent.

Meanwhile, Reuters reported that September's shortfall was bigger than the $38.1 billion gap the government had assumed in its estimate of third-quarter GDP last week, when it said the economy expanded at a 3.5 per cent annual rate, with trade adding 1.3 percentage points.

According to economists, who had expected a $40.00 billion trade gap in September, the wider deficit could cut as much as half a percentage point off that growth estimate. This would come in addition to a reduction of about two-tenths of a point due to weak construction spending data released on Monday, they said.

The government would publish revisions to third-quarter GDP later this month.

The Commerce Department said in another report that factory production was down for a second straight month in September. US factories would, however, continue ticking thanks to strong domestic demand.

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