Strong Exports Help Narrow Trade Deficit
By KELLY EVANS
October 12,
2007; Page A2
The nation's trade deficit narrowed in August as U.S. exports rose for a sixth consecutive month, a sign that strong demand for American goods and services may help offset troubles in the housing and credit markets.
The Commerce Department said exports rose to a seasonally adjusted $138.3 billion in August while imports fell to $195.9 billion, yielding a $57.6 billion deficit. That gap was $10 billion narrower than in August 2006, largely because of the falling value of the U.S. dollar, which has made American goods cheaper abroad, and strong global growth, which continues to fuel demand for U.S. goods and services.
"It's good that the U.S. can rely on foreign economies to prop up growth here at a time when we need the help," said Jay Bryson, global economist with Wachovia Corp. "Asia's on fire right now, Europe is slowing somewhat but, in general, growth around the world remains pretty solid right now."
The surprising strength of exports led many economists to raise their estimates of third-quarter gross domestic product. Economists had expected exports to remain flat. The $10 billion year-to-year drop in the trade deficit, roughly speaking, translates into a full percentage point increase in the annual rate of GDP growth for the third quarter.
Forecasting firm Macroeconomic Adviser raised its estimate of third-quarter growth to 3.3% from 2.7%, and many others made similar adjustments.
"Any doubt that trade is not contributing to U.S. growth is certainly behind us," said Peter Kretzmer, senior economist at Bank of America Corp. "The implication that's most important is that trade's contribution to third-quarter GDP is so large as to more than offset the negative contribution from housing," he said.
Mr. Kretzmer said that while strong foreign demand for U.S. products is helping fuel economic growth, such a boost cannot be taken for granted. "The risk that comes along is that our trading partners will be somewhat weakened by our own apparent weakness," he said. "If their demand for U.S. [goods] begins to diminish that will limit our exports."