US trade deficit down to $40.1 billion in August

In Photo: Assembly line workers build a 2015 Chrysler 200 automobile at the Sterling Heights Assembly Plant in Sterling Heights, Michigan. The Commerce Department reported on Friday that the US trade deficit decreased to $40.01 billion in August, the lowest since January.

WASHINGTON—The US trade deficit shrank for the fourth straight month in August, falling to the lowest level since January as exports rose to an all-time high.

The deficit dropped 0.5 percent in August to $40.1 billion, compared to a revised $40.3 billion in July, the Commerce Department reported on Friday.

Exports increased 0.2 percent to a record $198.5 billion, aided by increased sales of petroleum, telecommunications equipment and industrial engines. Imports also rose by a smaller 0.1 percent to $238.6 billion.

Even with the falling deficit the past four months, the imbalance so far this year is running 4.2 percent higher than the same period in 2013. A larger deficit acts as a drag on the economy because it means more money going to foreign companies.

The politically sensitive trade deficit with China edged down 2.2 percent to $30.2 billion, only slightly below the all-time high of $30.9 billion set in July. The deficit with China is on track to set another record for the entire year, putting more pressure on Congress and the Obama administration to take steps to curb what China’s critics see as unfair trade practices.

US manufacturers say that China is manipulating its currency to gain trade advantages over US companies. They say China undervalues the yuan to make the goods it manufactures cheaper when they are exported, and American products more expensive in China.

A higher trade deficit subtracts from economic growth because it usually means that foreign companies sell more in this country while US producers see fewer sales in overseas markets.

Through August, the trade deficit totaled $335.2 billion, compared to $321.7 billion for the same period last year, when the deficit for the whole year totaled $476.4 billion, 11.4 percent lower than in 2012.

For this year, many economists believe the trade deficit will be slightly higher than in 2013, reflecting in part a stronger US economy attracting more imports. They are forecasting the deficit will be a modest drag on overall growth.

The decline in the deficit in 2013 reflected in part a boom in US energy production that has reduced America’s dependence on foreign oil while boosting US petroleum exports to a record high.

In August US exports of petroleum were up 2.2 percent to $14.1 billion, while petroleum imports fell 3.8 percent to $27.2 billion.

So far this year, petroleum exports are running 16.9 percent above the level of a year ago, putting the country on track to set another record for petroleum exports.

Expansion

US service firms expanded at a healthy pace in September although it was slightly below the record pace set in August.

The Institute for Supply Management reported on Friday that its service index dipped to 58.6 last month, down from a reading of 59.6 in August which had been the strongest level recorded since the measure was introduced in January 2008.

Hiring at service firms, where most Americans work, rose for a seventh straight month.

The service sector index covers about 80 percent of the private, sector economy. The index tracks new orders, business activity,  employment and supplier delivery delays. The hiring gains were led by increases in construction and retail trade. Among the comments was one which said that the “previous conservative staffing model is relaxing due to increased demand for services.”

A total of 12 service industries reported growth in September. Five reported contraction.

On Wednesday the purchasing managers group reported that its index of manufacturing activity slipped slightly in September to a reading of 56.6, down from 59 in August.

For both indexes, any reading above 50 signals growth. 

Image credits: AP

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