U.S. Trade Deficit Narrows

The Commerce Department reported that the U.S. trade deficit declined 3.5% to $30.7 billion, surprising economists who had expected higher oil prices to push the imbalance to $33 billion. Oil prices did shoot up, but the volume of shipments dropped sharply in August, Manufacturing.Net reports.

For August, exports of goods and services edged up 0.2% to $28.2 billion, the highest level since December. The strength reflected higher sales of U.S. farm products including soybeans and wheat, and increases in sales of autos and related parts, industrial engines and telecommunications equipment.

The rise in exports is being aided by a weakening dollar, which is down nearly 12% against a range of other currencies since the beginning of the year. The dollar is expected to remain under pressure in coming months, due partly to soaring U.S. budget deficits. A weaker dollar boosts exports by making U.S. products cheaper on foreign markets. Through the first eight months of this year, the trade deficit has been running at an annual rate of $357 billion, about half of last year’s $695.9 billion imbalance.

The U.S. deficit with China dipped slightly to $20.2 billion, down 0.9% from July. Through August, the deficit with China totals $143.7 billion, down 15.1% from last year’s record pace. Even with the small improvement, trade tensions have been rising between the two economic powers with China denouncing a move by the Obama administration last month to impose punitive tariffs on imports of Chinese tires.

Imports dropped 0.6% to $158.9 billion, reflecting a 5.7% fall in petroleum imports to $21 billion. A big decrease in the volume of shipments offset a sharp rise in prices. The average price of a barrel of imported crude oil rose to $64.75, up from $62.48 in July and the highest since last November.