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US September Trade Deficit Down 9.9%

Exports rose 0.6% and imports fell 1.3%.Exports rose 0.6% and imports fell 1.3%.

The US trade deficit fell in September to the lowest level in 19 months as demand for US-made airplanes and other exports increased while imports slipped. The politically sensitive deficit with China declined.

The deficit narrowed to $36.4 billion in September, down 9.9% from August, the Commerce Department said Friday. It was the lowest imbalance since February 2015. Exports rose 0.6% to $189.2 billion, the highest level in more than a year. The pickup in US shipments overseas was led by exports of commercial aircraft and artwork that are volatile categories, Bloomberg reported.

Imports fell 1.3% to $226.6 billion.

The latest report offers American manufacturers an encouraging sign that the problems caused by overseas weakness and a rising dollar were beginning to wane. A falling trade deficit bolstered the overall economy in the July-September quarter. Economists are looking for further gains in the coming months.

So far this year, the deficit is running 2.5% lower than the same period in 2015. For all of last year, the deficit totaled $500.4 billion, up 2.1% from the previous year.

The deficit with China contracted to $32.5 billion in September and is running 6.3% below last year’s level, although it remains America’s single-biggest deficit.

The deficit with the European Union fell 26.8% to $10.2 billion, while the imbalance with Mexico edged down 0.6% to $5.2 billion.

 Analysts Hopeful

A narrowing trade deficit added to overall economic growth by 0.8 percentage point in the July-September quarter, helping to lift overall growth to a rate of 2.9%, double the 1.4% pace of the second quarter.

Analysts are hoping that the deficit will continue to shrink, aided by rising export sales now that the dollar has stabilized after a period of sizable gains. A stronger dollar makes US goods more expensive on foreign markets while making imports cheaper in the United States.

Meanwhile, President Barack Obama’s 2013 tax increases for wealthy Americans neither slowed their income growth nor hurt the economy, according to a study that taps into a key debate in the current presidential race.

The top 1% of earners managed to increase their share of the nation’s income at about the same pace after their taxes were raised as they had before, according to the study, released Thursday by Emmanuel Saez, an economics professor at University of California, Berkeley.

That outcome suggests that wealthier Americans did not respond to the higher taxes by either working less or saving less, as many economists often say will happen.

 

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