WASHINGTON – The U.S. trade deficit rose sharply in October, due largely to a sharp drop in foreign insurance payments as claim activity returned to normal in the month after Sept. 11 attacks on the United States.
The Commerce Department said Wednesday that the trade gap increased by $10.4 billion in October to $29.4 billion after plummeting in September to $19.0 billion.
The October trade gap reflected an $11.0 billion month-to-month increase in imports of goods and services to $106.8 billion. The change included $10.5 billion that mostly reflected a return to the normal relationship between premiums paid to foreign insurers and claims received, Commerce said.
In comparison, imports of other goods and services were little changed from the previous month, reflecting the sluggish U.S. economic picture.
"You have a somewhat wider-than-anticipated trade gap but this said, essentially it went back to where the trend should have been now that the insurance payment quirk is out of the data," said Kathleen Stephansen, senior international economist with Credit Suisse First Boston in New York.
U.S. exports in October totaled $77.3 billion, up only $500 million from the depressed September level as overseas demand also remained weak.
The U.S. trade deficit with China in October hit a record $9.2 billion, as U.S. imports from the Asian giant hit a record $10.8 billion amid exports of $1.65 billion.
In a sign of weakness elsewhere in Asia, U.S. exports to South Korea totaled just $1.5 billion, down from more than $2.0 billion in September and the lowest since February 1999.
"You haven't seen any shrinkage in the trade gap which you would normally get in the U.S. recession. That's a function of this business cycle where everyone, the U.S. and the global economies, seems to be slowing down quite abruptly," said Carey Leahey, senior U.S. economist with Deutsche Bank Securities in New York.
Oil imports rebounded in October to their second-highest level of the year as average prices fell to $19.94 per barrel, down from $22.99 the previous month and the lowest since the September 1999 level of $19.69.