The U.S. trade deficit reached a new record in October, the Commerce Department reported yesterday. Rising purchases of foreign goods by an abidingly strong American economy helped drive the figure to $25.9 billion.
The biggest jump in imports was in capital goods, notably computers and related equipment, consumer goods and foods. At the same time, there was a small falloff in exports, primarily in telecommunications equipment.
The United States has been reporting bigger deficits--the difference between what it buys and sells to the world--almost without a break since financial panics sent the "growth" economies of East Asia into recession in 1997. The trade deficit was $24.2 billion in September.
Still, the size of the October jump surprised many analysts. "It's well above the consensus," said Wayne Ayers, chief economist at Fleet Boston Financial. "It's really quite a striking number."
The impending holiday shopping season helped bolster the import figures, analysts said, as merchants stocked up on low-cost goods from China and other developing countries. In addition, noted Don Hilber, senior economist at Wells Fargo & Co., some categories of imports, notably oil, have risen in price, adding to the nation's import bill even if quantities stay the same.
Further widening the deficit is the sluggish rate at which foreign economies are recovering from the troubles that started in 1997. Thus they have less money to spend on U.S. goods.
All in all, the most important reason for the higher figures "is that we're still growing much faster than most of our trading partners," said Nariman Behravesh, chief international economist at research firm Standard & Poor's DRI. ". . . A rapidly growing economy sucks in a lot of imports."
The deficit was an important political number in the 1980s, during times of high U.S. unemployment, when it was frequently blamed for sending U.S. jobs abroad. The high deficit number attracts comparatively little comment in the low-unemployment era of the late '90s, though members of Congress generally continue to treat it as a negative.
Many economists say that high deficits mean the United States is performing an important service to the world, pulling it out of economic crisis by providing a ready market for exports.
A potential down side is that dollars sent abroad are "lost" in terms of generating economic growth in the United States, though with the strong figures that the economy is turning in anyway, many economists don't see that as a problem.
After today's numbers were announced a number of economists downgraded their estimates for fourth-quarter economic growth. While many economists feel the United States can keep up the deficits for several years to come, they say that eventually the buildup of dollars abroad might drive the currency's value down. That would make it harder for Americans to buy foreign goods and would create inflationary pressure.
Economists differ as to when the deficit figure might begin to decline, though many say it will do so next spring or summer. At that point, the reasoning goes, the world economies might come to be more in sync with each other, with trade partners growing and importing more, and the U.S. economy cooling off a bit and buying less from abroad.
Those are just projections, however. Japan, one of the United States' biggest foreign trading partners, remains stuck in malaise. It reported a 1 percent shrinkage in its economy for the third quarter of this year. The goods deficit with Japan grew from $6.6 billion in September to $7.2 billion the following month, the department reported.
China also showed a $7.2 billion figure, up from $6.9 billion. That country's trade imbalance with the United States has been the subject of criticism in Congress; U.S. trade officials contend that a deal they negotiated to bring China into the World Trade Organization, the Geneva-based body that oversees world trade, will help lower the number by giving U.S. companies better access to the Chinese market.
The deficit also grew with Western Europe, going from $3.5 billion in September to $5 billion in October. The deficit with Mexico was down from $2.2 billion to $1.4 billion, while Canada's was up from $2.8 billion to $3.2 billion.
The United States maintained its trading surplus in high-tech products, exporting about $700 million more in October than it bought.
The U.S. trade deficit widened in October, reaching another record.
Imports: $107.9 billion
Exports: $81.9 billion
Deficit: $25.9 billion
SOURCE: Commerce Department