September's U.S. trade deficit jumps to $36.5 billion, but exports also rise

In a setback on the U.S. trade front, the nation's trade deficit surged 18.2% to $36.5 billion in September, driven higher by an increase in imports, the U.S. Commerce Department announced Friday.

A Bloomberg News survey had expected the gap to total $32 billion in September. The Commerce Department's revised numbers for August and July show deficits of $30.8 billion and $32 billion, respectively.

In September, imports rose 5.8% to $168.4 billion, led by higher oil costs. However, exports also rose, by 2.9% to $132.0 billion, led by increased sales of civilian aircraft and industrial machines.

In another bit of positive news, for the first nine months of 2009, the trade deficit totaled $274.6 billion, down substantially from $551.4 billion for the same period in 2008.

Separately, import prices rose 0.7% in October, the third straight monthly increase, the U.S. Labor Department announced Friday. Blame oil here, too: The rise came on the back of a 1.8% increase in fuel prices. Export prices increased 0.3% in October, after declining 0.2% in September.

The 20-month U.S. recession, which appears to have ended in the third quarter, has led to one long-term benefit for the nation's economy: a yearly decrease in the trade deficit now appears likely -- which results in less U.S. wealth flowing to foreign sources. The biggest factor in the shrunken trade gap is the "frugal consumer" trend. After a decade of overconsumption, Americans have tightened their belts and increased their savings to rebuild nest eggs hit hard by the stock market and housing sector slumps.

However, exports have also strengthened, aided by a weaker dollar, which makes U.S. products less expensive for foreign buyers.

Economists prefer that a nation run a trade surplus rather than a deficit because it usually implies that a nation's goods are competitive on the world stage, its citizens aren't consuming too much and that it's amassing capital for future investment and economic goals.

Economic Analysis: First the bad news. September's trade deficit will likely decrease U.S. GDP by 0.4 to 0.5 percentage points from the 3.5% rate registered in the third quarter. Moreover, the U.S. economy needs sustained, nominal, quarterly GDP increases of 4% to 6% in the initial stage of the recovery to create enough jobs to lower the unemployment rate.

The good news is that exports continue to rise, aided by the weak dollar. Assuming a moderation in oil prices, and continued, decent export demand for U.S. machinery and aircraft, the trade deficit's decline should resume in the fourth quarter, bolstering the U.S. economic recovery.

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