U.S. Trade Deficit Shrinks

by: Roy Mehta

The Commerce Department said Thursday the trade deficit narrowed in August, as exports increased for the sixth month in a row. The deficit dropped 2.4% to $57.6 billion from a revised $59 billion in July. The number beat economists' estimates of $59 billion. A weak dollar and a general increase in demand for U.S. goods were the main reasons for the smallest trade gap since January. The continuation of this demand is extremely important as most believe the housing slump has not bottomed, and could still pull the U.S. economy into a recession. "Strong global demand is going to be a very important source for U.S. economic growth," said Meny Grauman, an economist at Scotia Capital. "We see ongoing strength in exports and ongoing softness on the domestic side." Prices of goods imported by the U.S. were up 1%, but if oil was excluded, prices actually fell 0.2%, the largest drop since October 2006. Also, the trade deficit with China, the U.S.'s second largest trading partner behind Canada, decreased 5.4%, as American companies sent a record $5.9 billion worth of goods to China in August.

Sources: International Business Times, Bloomberg
Commentary: People's Bank of China Hikes Rates AgainRates Unlikely To Fall Much Further, Dollar To Find Support; Looking To Sell Commodities
Stocks/ETFs to watch: SPY, DIA

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