Trade deficit narrows to lowest level this year

By Vicki Needham - 11/10/11 10:48 AM ET

Record high exports in September drove the nation’s trade deficit to its smallest gap this year on the third straight monthly decline.

Sales of cars, industrial supplies and consumer goods helped lower the U.S. trade deficit to $43.1 billion in September, a 4 percent drop from a revised $44.9 billion August and the narrowest gap since December, the Commerce Department reported Thursday.

Exports increased 1.4 percent to an all-time high of $180.4 billion — with increased shipments of U.S. autos, parts and engines — from $177.9 billion in August.

Imports increased 0.4 percent to $223.5 billion — on autos, food and industrial supplies — as oil imports dropped and prices fell.

The Obama administration and trade advocates have argued that free-trade agreements passed in October with South Korea, Colombia and Panama will provide an additional boost for U.S. exports and create more jobs here.

Through the first nine months of the year, the trade deficit is running 11.6 percent ahead of last year — an annual rate of $558.2 billion, compared with $500 billion last year.

A better-than-expected trade deficit during the last three months could provide a boost to the July-September economic growth numbers, which came in at 2.5 percent on the first estimate.

Imports of oil were up 0.3 percent to $36.4 billion as the average price for a barrel of imported oil fell to $101.02 in September, from $102.62 in August, the fourth straight monthly decline following huge jumps in prices during last spring.

Still, prices are much higher than last year, when they were averaging $72.33 a barrel.

The deficit with China, which closed slightly to $28.1 billion after a record-high $29.1 billion in August, will likely finish the year as the highest ever recorded with one country.

Congressional lawmakers are pushing a bill that includes penalties, including tariffs, if China doesn’t let its currency appreciate against the dollar. The Senate passed a bill last month but House Republicans remain wary of moving forward with a measure, citing possible repercussions on U.S. imports into the communist nation.

Scott Paul, executive director for the Alliance for American Manufacturing, criticized the Obama administration, saying its “China strategy is not working.”

“No amount of jawboning will balance our trade relationship with China; only consequences will make a difference,” Paul said in a news release.

“If a record trade deficit with China is not reason enough for the House to pass this bill, then perhaps a dissatisfied electorate will convince Members of Congress to do the right thing.”

Also, Thursday’s report showed that the deficit with Japan fell to $5.2 billion from $6.7 billion in August, a drop of nearly 23 percent as exports fell 12.1 percent.

The nation is still recovering from supply-chain disruptions caused by the earthquake and tsunami in March, even though economists had expected auto plants and other factories would be producing at pre-disaster rates again by September.