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U.S. Foreign Trade Balance Posts $10.5 Billion Deficit

Article excerpt

WASHINGTON (AP) _ America's foreign trade balance, after posting two rare surpluses on the strength of Persian Gulf military payments, plunged back into the red during the July-September quarter, the government said Tuesday.

Analysts said the $10.5 billion deficit in the current account, the broadest measure of foreign trade, could very likely worsen further in coming months, adding one more burden to an already stagnant U.S. economy.

That would represent another setback for the Bush administration, which is pinning a good deal of its hopes for stronger growth next year on further gains in American export sales.

The third quarter deficit followed the first quarterly surpluses in nearly a decade. The current account surplus totaled $10.5 billion from January through March and $3 billion from April to June.

Those surpluses came as a result of $35 billion in payments from Japan, Saudi Arabia and other countries to reimburse the United States for the Persian Gulf war.

However, the allied payments shrank to $4.6 billion in the third quarter and this was not enough to offset a giant 33 percent increase in the merchandise trade deficit.

The current account, also known as the balance of payments, is considered the most important trade statistic because it measures not only trade in merchandise but also in services such as banking and tourism and investment flows between nations.

President Bush visited the Chicago Board of Trade on Tuesday to highlight the impact that world trade has on the domestic economy.

The president conceded that the economy at present is in a slump but he said there were "some encouraging signs. ... Now we just have to give it a kick, get it started up again."

However, analysts said the $10.5 billion third quarter deficit served to underscore ominous trends in trade. U.S. exports, which had been one of the few bright spots for the economy, have turned weaker as economic growth has faltered in some major markets for American goods.

"Our exports are slowing down because the rest of the world is slowing down," said David Wyss, senior financial economist at DRI-McGraw Hill. "Germany has suffered two quarters of negative economic growth and the rest of Europe is slowing as well."

Economists forecast that this year's current account deficit would dip to around $20 billion, far below last year's $92. …