Trade Deficit Declines To Lowest Point In 2 Years

Monday, December 17th 2007, 7:45 am
By: News On 6

WASHINGTON (AP) _ The U.S. trade deficit declined during the third quarter to the lowest level in two years, raising hopes that the country's trade troubles could be easing.

The Commerce Department reported Monday that the current account trade deficit fell by 5.5 % to $178.5 billion in the July-September quarter. That was a better-than-expected showing and the smallest current account imbalance since a $173.4 billion deficit in the third quarter of 2005.

The current account is the most comprehensive measure of trade because it includes not only trade in products and services but also investment flows between countries.

The current account deficit had set all-time highs for five consecutive years but has declined for two consecutive quarters, prompting economists to predict that this year will see the deficit finally start to decline.

The improvement reflects in part the decline of the dollar against many other major currencies. A weaker dollar makes U.S. products cheaper in foreign markets while making foreign goods more expensive for American consumers.

The deficit in goods shrank by 2.2 % to $199.7 billion in the third quarter as record levels of export sales helped offset a rising foreign oil bill.

The surplus in services, items such as airline tickets and consulting fees, increased by 3 % to $26.5 billion. The surplus in investment income flows surged by 61.5 % to $20.5 billion. The only deterioration occurred in the category that includes foreign aid, which rose to $25.8 billion, up from $23.2 billion the previous quarter.