The U.S. trade deficit narrowed by a record amount in September to $18.7 billion, as huge payments by foreign insurance companies for the terrorist attacks offset a rising in the deficit in manufactured goods. 

The Commerce Department said the September deficit was the lowest in 30 months and the 31 percent decline from the August level was the biggest one-month improvement on record. The August deficit was $27.1 billion.

The improvement came all on the services side, however, as the deficit in goods actually rose by 5.4 percent during the month to $35.9 billion.

But this was offset by a big increase in America's surplus in services trade, reflecting an increase of $11 billion in payments related to the Sept. 11 hijacking attacks on the World Trade Center in New York and the Pentagon in Washington.

For the purpose of its statistical reports, the government counted all of those claims as paid in September, the date of the attacks. That had the effect of pushing up America's services surplus to a record $17.2 billion.

So far this year, the total trade deficit is running at an annual rate of $345 billion, which represents a narrowing from last year's record imbalance of $375.7 billion.

The narrowing trade deficit in recent months has reflected the weakening U.S. economy, which has cut sharply into U.S. demand for imports. U.S. exporters have also had to struggle as economic weakness overseas has dampened their sales as well.

Many private economists believe the United States has fallen into a mild recession with a recovery expected to begin sometime next year. The overall economy declined at an annual rate of 0.4 percent in the July-September quarter and many economists are predicting an even bigger shrinkage in output at a 1.5 percent rate in the current quarter.

The Bush administration has been promoting an economic stimulus package, but the measure is stalled in Congress because of a dispute over how the package should be split between tax cuts and government spending increases.

The $18.7 billion deficit in September reflected the smallest monthly imbalance since an $18.4 billion shortfall in March 1999.

The improvement came despite the fact that the deficit in just goods rose by 5.4 percent to $35.9 billion, the largest goods deficit since April.

For goods and services, total exports fell by 8.5 percent to $77.3 billion, the lowest level for exports since March 1999. Exports of telecommunications equipment, autos, industrial machinery, computers and commercial aircraft were all down.

Imports of goods and services in September dropped an even sharper 14 percent to $95.99 billion, also the lowest level since March 1999. Imports have fallen for six consecutive months. Imports of foreign cars, computers and telecommunications equipment all fell.

For individual countries, the deficit with China rose by 5 percent to $8.5 billion, the highest level in nearly a year. The deficit with Japan was essentially unchanged at $5.4 billion as imports from that country fell to their lowest level in more than two years.

The September deficit with Canada fell by 4.1 percent to $4.3 billion, the lowest level since May 2000.

America's foreign oil bill fell by 2.1 percent to $8.39 billion as the volume of crude oil shipments fell to 8.86 million barrels per day, down from 9.4 million in August. The cost per barrel rose slightly to $22.99, compared to $22.15 in August.