By MARTIN CRUTSINGER
WASHINGTON – America’s trade deficit shrank to $29.4 billion in August. It was the lowest level in six months as U.S. exports surged to a record level, with big gains in sales of computer products, autos and American farm goods.
Imports also climbed to a record, but falling oil prices gave temporary relief to America’s soaring oil bill.
The Commerce Department said today that the August imbalance between what America sells abroad and what it buys from foreign nations dropped by 7.1 percent from the record high of $31.7 billion set in July.
It was the lowest monthly imbalance since a deficit of $27.5 billion in February. Even with the August improvement, the deficit for this year is running at an annual rate of $353 billion, far above last year’s record deficit of $265 billion.
Economists have cautioned the trend is unsustainable and poses a risk to the overall economy should foreigners, who so far have been willing to finance the deficits, suddenly decide to pull out of the U.S. economy, triggering a crash on Wall Street.
The trade deficit is the one major negative in what otherwise is a remarkable economic performance. The Clinton administration argues that the deficit is simply a sign that the U.S. economy has been growing at much stronger rates than its allies’, drawing in imports from the rest of the world.
But critics say the deficit, which has risen every year President Clinton has been in office, is a sign of failed trade policies. The administration has emphasized striking big market-opening deals with other nations to boost U.S. exports.
In a second report today, the Labor Department said 307,000 Americans filed new claims for unemployment benefits last week, a drop of 7,000 from the previous week and an indication that labor markets remain tight.
Some economists saw the trade improvement in August as an indication that the U.S. economy is slowing to a more sustainable pace while foreign countries are beginning to experience a rebound.
“Our economic growth rate is continuing to rise, but at a slower pace, while growth abroad is moving at a faster clip,” said Jerry Jasinowski, president of the National Association of Manufacturers.
Clinton recently signed into law legislation to support market-opening offers being made by China in its bid to gain membership in the World Trade Organization. However, China’s membership remains in doubt as final negotiations on the entry terms have bogged down in Geneva.
For August, America suffered its biggest deficit with China, a record $8.6 billion imbalance which reflected a huge jump in shipments of toys and Christmas decorations as American retailers prepared for the holiday sales season.
America’s deficit with Japan, perennially the largest, shrank by 10.1 percent in August to $6.8 billion.
Overall, U.S. exports jumped 3.6 percent to a record $93 billion. Big gains were recorded in sales of American farm goods, up by $219 million, with the increases led by shipments of fish, beef, poultry and corn.
Exports of American autos and auto parts were up $669 million and sales of capital goods, led by computer products, climbed by $1.2 billion.
Imports, however, also set a record, rising by 0.8 percent to $122.5 billion with increases recorded in shipments of capital goods including computers and telecommunications equipment and in consumer goods, including pharmaceutical products and televisions. Imports of cars were down.
The trade gap was also helped by the fact that while the volume of crude oil shipments rose, the price fell. The average per barrel dropped from a 10-year high of $27.76 in July to $26.59 in August, allowing the total crude oil bill to decline to $8.2 billion.
However, oil prices have climbed above $30 per barrel since that time and economists are predicting that will push the overall trade deficit back to record levels.
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