Wednesday, November 21, 2001


The U.S. trade deficit narrowed by a record amount in September to $18.7 billion, but the improvement reflected economic weakness at home and huge payments by foreign insurance companies for the terrorist attacks.

The deficit was the lowest in 30 months and the 31 percent decline from the August level was the biggest one-month improvement on record, the Commerce Department said. The August deficit was $27.1 billion.

The improvement came on the services side, as the deficit in goods actually rose by 5.4 percent by $35.9 billion.

But this was offset by a big increase in America’s surplus in services trade, reflecting an increase of $11 billion in payments related to the September 11 hijacking attacks on the World Trade Center in New York and the Pentagon.

For the purpose of its statistical reports, the government counted all of those claims as paid in September. That had the effect of pushing up America’s services surplus to a record $17.2 billion.

So far this year, the trade deficit is running at an annual rate of $345 billion, which represents a narrowing from last year’s record imbalance of $375.7 billion.

The narrowing trade deficit in recent months has reflected the weakening U.S. economy, which has cut sharply into U.S. demand for imports. U.S. exporters also have had to struggle as economic weakness overseas has dampened their sales.

Kathleen Cooper, Commerce Department undersecretary for economic affairs, said these trends were likely to continue over the coming months, helping to further lower the trade deficit.

“The U.S. trade deficit has been getting somewhat smaller in the last six months,” she said. “What we are likely to see over the next six months to a year is a continuation of this trend of a slowly shrinking trade deficit.”

Many private economists believe the United States has fallen into a mild recession with a recovery expected to begin next year. The overall economy declined at an annual rate of 0.4 percent in the July-September quarter, and many economists are predicting an even bigger shrinkage in output at a 1.5 percent rate in the current quarter.

The Bush administration has been promoting an economic-stimulus package, but the measure is stalled in Congress because of a dispute over how the package should be split between tax cuts and government-spending increases.

The $18.7 billion deficit in September reflected the smallest monthly imbalance since an $18.4 billion shortfall in March 1999.

The improvement came despite the fact that the deficit in just goods rose by 5.4 percent to $35.9 billion, the largest goods deficit since April.

Imports have fallen for six consecutive months.

For individual countries, the deficit with China rose by 5 percent to $8.5 billion, the highest level in nearly a year. The deficit with Japan was essentially unchanged at $5.4 billion as imports from that country fell to their lowest level in more than two years.

The September deficit with Canada fell by 4.1 percent to $4.3 billion, the lowest level since May 2000.

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