Trade deficit surges to record $34 billion

Associated Press

WASHINGTON — The U.S. trade deficit ballooned to a record $34.3 billion in September as America’s already huge foreign oil bill got bigger and helped push imports to an all-time high. The deficit with China climbed to $8.7 billion, the largest ever recorded with any country.

September’s trade gap was up a sharp 15 percent from an August imbalance of $29.8 billion, the Commerce Department reported Tuesday, well above economists’ expectations for a more modest deterioration to around $31 billion.

Exports slipped from their previous month’s record as shipments of U.S. cars and auto parts dropped sharply and various other exporters from farmers to computer manufacturers suffered setbacks.

Among other negatives affecting the deficit, which covers trade in both goods and services, was payment of nearly $700 million by NBC for broadcast rights to the Olympic Games in Australia.

The Clinton administration insisted that the big jump in the deficit did not signal economic weakness and predicted that improving economies overseas will make future months look better.

"While the deficit is too high, it does not reflect problems with the underlying domestic economy," Commerce Undersecretary Robert Shapiro told reporters at a briefing on the trade figures.

Private analysts cautioned, however, that the September setback showed how far the United States has to go to narrow the huge trade gap, running at an annual rate of $360 billion, far above the previous record of $265 billion set last year.

The exploding trade deficit is the one flaw in an otherwise remarkable U.S. economic expansion, which has already produced a record 9 1/2years without a recession.

Gerald Cohen, an economist at Merrill Lynch, said the big September trade deficit will translate into a lower government estimate for overall economic growth in the July-September quarter from 2.7 percent down to around 2 percent, the slowest quarterly growth rate in more than five years.

Many private economists worry that the deficit may have reached a level that could pose a risk to the overall economy if foreigners, who have been eager to sell their products and hold dollar-denominated investments, suddenly should decide to dump their U.S. holdings and send stock and bond prices plunging.

"The inevitable question raised by huge and growing trade deficits is whether this situation represents a train wreck waiting to happen," said Ken Mayland, economist with Clear View Economics in Pepper Pike, Ohio.

Copyright ©2000 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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