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Wednesday, 18 April, 2001, 14:03 GMT 15:03 UK
US trade gap shrinks dramatically
Boston docks
Fewer foreign goods are being shipped to the US
A dramatic drop in imports helped push the US trade deficit to its lowest level since December 1999, according to the latest figures.

But the news is just one more sign of the dramatic slowdown in the US economy.


One of the positives that comes out of a slowing economy is a narrowing trade deficit

Mark Zandi
economy.com
Imports of foreign goods - from petroleum to shoes - dropped by the largest amount on record in February.

The Commerce Department said that the trade gap for February narrowed by 18.8% to $27bn from a January imbalance of $33.3bn - a far bigger improvement than economists had been expecting.

The narrowing trade gap is a by-product of the sharp slowdown in the US economy which has cut into consumers' apparently insatiable demand for foreign-made products.

Politically sensitive

The February figures reflected a 4.4% decline in imports, the largest one-month decrease since the government started tracking monthly trade flows in goods and services in 1992.

The politically sensitive deficit with China narrowed sharply in February but the imbalance with Japan widened.

A poll of economists by news agency Reuters had forecast on average that the trade gap would narrow slightly to $32.91bn from $33.26bn in January.

Jay Bryson, global economist at First Union bank, said: "Most of the drop in the trade deficit is in imports, which were down pretty dramatically.

"Exports were also going up. The decline (in imports) is pretty broad-based - not just in industrial goods but also in consumer products.

"That's a function of the slowdown in the US economy in the first quarter, and also of the dramatically lower price of oil in February, which shows up in the industrial supplies part of the equation."

'Dark side'

Mark Zandi, chief economist of economy.com, told Reuters: "One of the positives that comes out of a slowing economy is a narrowing trade deficit.

"On the dark side, it indicates that consumers and businesses are having problems spending and investing.

"But the positive is that we are less dependent on foreign capital.

"On the margin, it should be viewed positively by the currency and bond markets."

The US economy is expected to slow to a growth rate of around 1% in the first three months of 2001, compared to over 5% in the middle of last year.

The shrinking trade gap should also help boost the dollar, which has increasingly been seen as a safe haven as the world plunges towards recession.

It will also diminish protectionist pressures in the US Congress, on the eve of the Quebec Summit, where President Bush is expected to push forward his initiative for a free trade zone throughout the Americas.


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20 Mar 01 | Business
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