Trade Gap Narrows, Consumer Prices Up
Reuters
Tuesday November 19, 4:42 pm ET
By Joanne Morrison
biz.yahoo.com
WASHINGTON (Reuters) - The U.S. trade deficit edged down in September, but
was still at the second highest level on record and was worse than economists
expected, while higher energy costs pushed up consumer prices in October.
The September U.S. trade deficit
shrank just 0.7 percent to $38.03
billion from the record of $38.28
billion set in August, the
Commerce Department reported
on Tuesday. But for the first nine
months of this year the deficit hit a
record, likely setting the stage for
the worst year of U.S. trade
performance on record.
Meanwhile, consumers were hit
by the biggest energy price
increase in six months, according
to the Labor Department.
Separate retail reports showed
lukewarm chain store sales in the first half of November, the start of the crucial
holiday season.
In its latest report, the Labor Department said a 1.9 percent rise in energy prices
accounted for half of the overall October 0.3 percent advance in the Consumer
Price Index, the government's closely watched gauge of inflation.
Excluding volatile food and energy prices, the CPI was up a moderate 0.2
percent, leaving economists with little worry that inflation would be getting out of
control.
"Inflation is not a problem, but it is not completely tame," said Joel Naroff, of
Naroff Economic Advisors in Holland, Pa.
Economists in a Reuters poll were expecting the 0.3 percent gain in the overall
CPI and 0.2 percent rise excluding food and energy prices.
"The energy prices were up but you will see some moderation in November,"
said Asha Bangalore, economist at Northern Trust Co. in Chicago. "I don't think
it's going to change Fed policy in any way. The focus is on reviving economic
growth and inflation is not going to be a big concern," she added.
Earlier this month, the Federal Reserve cut interest rates half a percentage
point, bringing key rates to a decades-low level to help keep the recovery from
stalling out.
U.S. Treasury bonds were mixed on Tuesday, little affected by the tame October
inflation report or by the slight dip in the U.S. trade gap in September.
STOCKS DOWN ON WEAK RETAIL SALES
Stocks declined on Tuesday amid lackluster sales reports from retailers
including Home Depot Inc. (NYSE:HD - News), dimming hopes that a slowly
improving economy will lift corporate profits.
With the holidays barely a month away, consumers have yet to show few signs of
life, according to two reports published on Tuesday.
Sales at chain stores slipped 1.2 percent in the week ended Nov. 16 after a 0.5
percent gain in the preceding week, the Bank of Tokyo-Mitsubishi said in a
weekly report. Separately, Instinet's Redbook report showed a meager 0.1
percent rise over the first two weeks of November.
TRADE DEFICIT ABOVE EXPECTATIONS
The latest trade deficit tally topped the average estimate of $37.33 billion made
by analysts surveyed before the report.
"The trade deficit continues to be an issue. It narrowed slightly but the issue here
is we have a very big trade deficit as a percentage of GDP that poses a threat
to the value of the dollar down the road, though not immediately," Bangalore
said.
Commerce Department Under Secretary Kathleen Cooper on Tuesday agreed
the data would not have a big impact on third quarter gross domestic product.
The next estimate for the third quarter is scheduled to be released next week.
"I don't think the data that came out today will make much of a change at all," she
said, adding that higher oil prices, caused by concern about a possible war with
Iraq, continue to be a drag on the economy.
Many economists were expecting imports to take a bigger tumble in
September, following a jump in August as companies stockpiled goods in
anticipation of a dock workers strike on the U.S. West Coast.
West Coast ports were closed the last two days of September and the first eight
days of October because of a labor dispute between dock workers and port
operators.
However, imports totaled $120.19 billion in September, down just 0.5 percent
from the year-to-date high of $120.78 billion in August. Exports -- which rose
more or less steadily in the first half of 2002 -- declined for the second
consecutive month in September to $82.16 billion, down 0.4 percent from
August, as the global economy struggled.
Still, economists say stockpiling ahead of the strike could lead to narrowing of
the trade deficit in coming months. "I would assume the trade deficit in October
is going to be quite a bit narrower," said Ram Bhagavatula, chief economist with
Royal Bank Scotland Financial Markets in New York.
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