US trade deficit narrows as exports surge

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WASHINGTON, Sept 12 (AFP): The US trade deficit narrowed slightly in July to 59.2 billion dollars from a revised 59.4 billion dollars in the prior month as a weak dollar boosted exports, the government said yesterday.
The commerce department report, which was generally in line with market expectations, showed US exports rose by 3.6 billion dollars in the month, outpacing a 3.4-billion-dollar increase in imports.
The increased exports are likely to add momentum to US economic growth during the third quarter.
"With domestic spending under pressure, as housing continues to decline and consumer momentum slows, strong export growth is crucial to keep the US economy moving forward," said Nigel Gault, an economist at Global Insight.
Economists said the acceleration in exports, which was led by aircraft, cars and telecom equipment, was in part fuelled by the weak dollar which has tumbled in value against other major currencies.
The surge in exports helped offset rising oil prices which otherwise could have widened the deficit as America is the world's biggest importer of crude oil, analysts said. The politically sensitive trade deficit with China totalled 23.8 billion dollars, marking its second highest on record after a gap of 24.4 billion in October 2006.
This was up from 21.2 billion in June and represented 40 per cent of the total trade decifit.
The deficit with China has prompted calls in Congress for China to revalue its currency which is viewed by some lawmakers as artifically low, but US administration officials argue the best way to open China to more investment and trade is through talks.
Oil was a big factor in the trade gap, with the bill of 20.3 billion dollars for oil imports the second highest on record. The average price per imported barrel was up 7.6 per cent in July to 65.56 dollars.
The report was released as Federal Reserve chairman Ben Bernanke addressed the large US balance of payments deficit which includes both trade and investment flows.
Meanwhile, Federal Reserve chairman Ben Bernanke said yesterday the large US balance of payments deficit "cannot persist indefinitely" but for now is not an unduly large burden for the American economy.
In a speech in Berlin, the text of which was made available in Washington, Bernanke made no comments on the US economic outlook or Fed monetary policy.
"Although the US current account deficit is certainly not sustainable at its current level, US liabilities to foreigners are not, at this point, putting an exceptionally large burden on the American economy," he said.
He said the large US deficit to the rest of the world "cannot persist indefinitely because the ability of the United States to make debt service payments and the willingness of foreigners to hold US assets in their portfolios are both limited."
"Adjustment must eventually take place, and the process of adjustment will have both real and financial consequences," he added.
Although some in financial markets had been looking for clues to the Fed's next move at its September 18 meeting, Bernanke stuck to his script on "global imbalances."
Most analysts expect the Fed to cut its base federal funds rate, which has been at 5.25 per cent since June 2006, in response to economic upheaval from the US housing slump and financial market turmoil. But there is considerable debate about whether the Fed will cut by a quarter-point, or make a more aggressive half-point move.
Bernanke's comments came after a report showed the US trade deficit fell marginally in July to 59.2 billion dollars, after a revised 59.4 billion in June.