OT - Bush sets the record

Trade Deficit now at $66 billion

http://nytimes.com/2005/11/10/business/10cnd-econ.html

November 10, 2005
U.S. Trade Deficit Hits $66 Billion, Another Record
By VIKAS BAJAJ
The trade deficit widened by 11 percent and set another record in September,
the government reported today, as exports of airplanes plummeted because of
a strike at Boeing and imports of natural gas and petroleum products surged
in the weeks after Hurricane Katrina struck the Gulf Coast. The deficit with
China also hit a record.

The United States imported $66.1 billion more in goods and services than it
exported in the month, breaking the previous record set in February when the
economy registered a $60.4 billion deficit, the Commerce Department
reported. The trade deficit in the first nine months of the year totaled
$529.8 billion, about 18 percent higher than at this time in 2004.

Economists had been expecting the trade balance to widen to $61.5 billion in
October, according to a survey by Bloomberg News.

"One-third of the widening of the deficit is the oil bill, and aircraft
sales explains most of the rest," said Carl Weinberg, chief global economist
at High Frequency Economics, a research firm. "It's a little superficial."

In the aftermath of Katrina, which hit New Orleans at the end of August,
gasoline and natural gas imports spiked because much of the domestic
production and refining in the Gulf Coast was shut down. Natural gas imports
surged 30 percent, to $3.7 billion, and petroleum products and fuel oil
jumped 22.8 percent, to $6.8 billion.

Crude oil imports, however, fell by $350 million, reflecting the shutdown of
refineries in the Gulf Coast because of damage from Katrina and later from
Hurricane Rita. A large oil import terminal off the coast of Louisiana was
also shut down for several days in September because of hurricane damage.

In an indication that the surge in energy imports is easing, the Labor
Department reported today that the price of petroleum-based imports fell 4.4
percent in October after surging 8 percent in September. The price of all
imports dropped 0.3 percent, only the second month this year that it has
fallen, after rising 2.3 percent in September. Excluding petroleum products,
import prices rose by 0.8 percent in October.

The United States' trade deficit with China, the largest with any single
country, rose 8.8 percent, to $20.1 billion. Exports to the country fell 17
percent and imports rose by 4 percent.

Earlier this week, American and Chinese government officials reached a deal
to restrict textile imports from that country for the next three years. The
Bush administration and Congress have also been pressing China to allow its
currency, the yuan, to appreciate against the dollar, which would make
American exports more attractive in China and Chinese imports less so.

The Chinese government reported today that its October trade surplus with
the rest of the world jumped to a record $12 billion in October. So far this
year, the booming country has amassed a surplus of $80.4 billion, up from
$32 billion at this time last year.

All told, exports to all countries fell by $2.8 billion, virtually all of it
because of falling airplane sales. That is largely a result of a machinists'
strike at Boeing, which forced delayed the shipment of 30 planes, according
to the company.

Exports of food fell $296 million, reflecting transportation delays caused
by the shutdown of the Port of New Orleans, from which many agricultural
products are shipped.

Imports rose $4 billion, most of it from industrial supplies and materials,
a broad category that includes energy products. Imports of consumer goods,
food and capital goods rose slightly, but the country brought fewer cars and
car parts from overseas in September.

Mr. Weinberg said he expected the trade deficit to narrow in the coming
months and next year as aircraft sales pick up again and energy prices
continue their retreat; oil and gasoline prices are already below where they
were immediately before Katrina struck. Just this week, Boeing projected an
11.7 percent increase in revenue in 2006 on higher airplane deliveries.

But other economists were less sure of an improvement in the trade balance,
noting that imports may rise as American businesses restock depleted
inventories. "The trend is not going to be that great if imports are picking
up in momentum," said Joshua Shapiro, chief United States economist for MFR
Inc., a research firm in New York.

Separately, the Labor Department reported that claims for unemployment
benefits rose by about 2,000, to 326,000 last week. Compared to the same
week last year, claims were down by about 5,000.

And the University of Michigan reported that its consumer confidence index
rose after falling for three straight months, edging up to 79.9 this month,
up from 76.5 in October.



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