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Wednesday, 19 December, 2001, 16:09 GMT
US trade soars to recovery
USA economy graphic
The US deficit soared in October after a sharp slump in September when the deadly terrorist attacks shook the US economy.

US Trade Deficit:
October: $29.4bn
September: $19bn
Rising 54.8% between the two months

Source: Commerce Department
The biggest one-month rise in more than eight years came as imports rose by $10bn (6.8bn), bringing the October deficit to $29.4bn from September's $19bn.

The bulk of the rise in imports of goods and services was a result of a normalisation of insurance premiums paid to foreign insurers and claims received, the US Commerce Department said.

September's deficit was the smallest recorded in more than two years after abnormally high insurance payments were accounted for.

The payments reduced the deficit by $11bn.

Deficit remains high

Imports of other goods and services changed little between September and October.

The US recession, which has resulted in a 4.5% fall in imports during 2001, has failed to seriously dent the troublesome trade deficit which ballooned under the Clinton administration.

This is because exports have fallen by almost as much, that is by 4.2%, due to economic weakness in America's main overseas markets.

Consequently, the deficit now stands at $351bn for the year, marginally lower than last year's $375.7bn deficit.

Bright future

Separate research has indicated that the US economy could soon climb out of recession as the fallout from the attacks is fading.

"The recession is not getting more intense," said economist Michael Fort of the influential private research organisation, Conference Board.

The Board's index of leading economic indicators moved up 0.5% in November after a 0.1% rise in October.

But although a recovery may be near, it may not be imminent, the Board warned.

"Despite the gains in the last two months, more declines may be in store in the near future as the recession continues its course," said Mr Fort.

China and Japan

Imports from China and Japan surged in October, pushing the US trade deficit with these economies to record highs, the Commerce Department said.

Japan, which is in dire economic straits, has seen its currency fall sharply, making its exports attractive to US consumers.

The US trade deficit with Japan rose 29.6% to $6.96bn.

China, meanwhile, has joined the World Trade Organisation, and this has boosted its trade with the US, sending the deficit to $9bn, 7.6% up on September.

As yet, China has not significantly lowered its barriers to trade by making it easier for other countries to sell their products to the Chinese people.

The Bush administration is pushing for this to happen, in part as a result of a "fast track" trade negotiating authority which President Bush was granted by the House of Representatives earlier this month.

The Senate is expected to approve the President's negotiating powers early next year, leaving the path free for him to push for enlarged international free-trade zones.

Recovery may boost deficit

The worry by some economists is that a recovery in the US may come before an upturn in the rest of the world.

This could, in the short run, boost US imports without a matching market for its exports being found in still depressed markets.

However, other countries may see a recovery result from a rise in demand for their exports from the US.

In time, therefore, they should catch up too.

EU, Canada, Mexico

The US deficit with the European Union rose by 16% in October to $6.96bn.

Its deficit with its main trading partner, Canada, fell by 10.7% to $3.79bn.

The deficit with Mexico also fell by 12.8% to $2.59bn.

 WATCH/LISTEN
 ON THIS STORY
Mike Fort, economist with the Conference Board
"It is concerning that we haven't seen an improvement in industrial production"
The BBC's Mark Gregory
"The picture looks an awful lot better than it did a few months ago"

Terror's impact

Signs of a slowdown

Rate cuts

Analysis

Key players

FULL SPECIAL REPORT
See also:

19 Dec 01 | Business
Dow signals US recovery
18 Dec 01 | Business
IMF: World economy to remain weak
26 Nov 01 | Business
US officially enters recession
18 Nov 01 | Business
US recession raises global fears
26 Sep 01 | Business
US economy in freefall
17 Dec 01 | Business
New York's economy shrinks
12 Dec 01 | Business
False starts for US economy optimism
06 Dec 01 | Business
Mixed signs from US economy
30 Nov 01 | Business
US economy shrinks fast
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