11/21 09:22 U.S. Sept. Trade Gap Widens to Record $34.3 Billion (Update1) By Vincent Del Giudice

Washington, Nov. 21 (Bloomberg) -- The U.S. trade deficit widened to a record in September as energy prices surged and imports of consumer goods reached a new high, government statistics showed today. Exports slipped from the previous month's record.

The $34.3 billion shortfall followed a gap of $29.8 billion in August that had been the narrowest in four months, the Commerce Department said. The report tracks goods and services.

The numbers suggest little slowdown in U.S. demand for foreign products, made cheaper by a dollar that has risen at least 12 percent this year against a trade-weighted mix of currencies. While lowering costs for many businesses, the influx of cheap goods is also limiting the ability of U.S. companies to pass along higher energy costs and sell U.S.-made goods abroad.

``America's appetite for cheap imported goods continues,'' said Chris Rupkey, an economist at Bank of Tokyo Mitsubishi in New York. ``Much to the chagrin of U.S. business, these goods continue to stream to our shores, making it impossible for them to raise their prices in order to firm up their sagging profit margins.''

Imports rose 3.1 percent in September to a record $126.6 billion, as the trade gaps with China, Canada and Mexico all set records. Exports fell 0.7 percent to $92.4 billion, as weaker demand for automobiles and auto parts, foods and consumer goods offset increases for semiconductors, civilian aircraft and aircraft engines. Exports were still the second highest after $92.9 billion in August.

Annual Record

Through September, the trade deficit totaled $270.2 billion this year, up from $188.7 billion during the first nine months of 1999, according to the Commerce Department. The September deficit puts the annual shortfall on track to reach a record $360 billion, compared with the previous high of $265 billion in 1999.

Unemployment at a 30-year low -- 3.9 percent in September and October -- is keeping consumer spending strong.

At the same time, many U.S. manufacturers have been hurt by sluggish international demand, while a string of interest-rate increases by the Federal Reserve between June 1999 and May this year have made it harder for companies to borrow. The Fed's rate hikes were aimed at containing the inflation threat by slowing U.S. economic activity.

In goods alone, the government reported a deficit of $40.2 billion for September.

Energy Imports

Imports of petroleum products, which include both crude oil and refined products, rose 16.4 percent in September. Imports of liquefied petroleum gas rose 23.6 percent. Fuel oil rose 27.4 percent, and natural gas rose 25.3 percent.

Crude oil futures had risen to a 10-year-high of $37.80 a barrel on Sept. 20. The trade figures reflect the value of merchandise and the U.S. imports more than half its oil. The average cost of a barrel of crude oil, as calculated by the Commerce Department, rose to $28.90 in September, the highest since the Iraqi occupation of Kuwait in November 1990.

Energy costs show little sign of abating. Natural gas rose to a record and heating oil moved close to its highest since 1979 yesterday on forecasts for colder-than-normal weather. Natural gas for December delivery traded as high as $6.395 for a million British thermal units yesterday, the highest in 10 years on the New York Mercantile Exchange. Heating oil rose to $1.0962 a gallon, close to the 21-year high of $1.11 set on Oct. 12.

Imports of consumer goods rose 2 percent in September after a gain of 0.9 percent in August. Shipments into the Port of Los Angeles increased 26 percent in October to a record 251,000 containers. The port, and the Port of Long Beach, also in California, are the two busiest in the U.S.

Auto Imports

Many of those incoming ships bore holiday goods. U.S. households will probably spend $490 on gifts this Christmas season, compared with $495 last year, based on a survey of 5,000 by the Conference Board.

Auto imports rose 0.1 percent in September after falling 0.5 percent in August. Exports of automobiles and parts fell 7.3 percent after rising 10.5 percent.

Exports of capital goods excluding automobiles fell 0.9 percent in September after rising 3.8 percent in August.

A euro that has declined as much as 18 percent against the dollar this year is eroding sales of many U.S. made products.

Caterpillar Inc., the world's largest maker of construction equipment, has said its third-quarter profit fell 1.4 percent because of a decline in the euro and higher costs. At the same time, cost cutting efforts and strong sales of electric power- generation equipment helped to temper the drop in demand for other products from the Peoria, Illinois, company.

Steel, Aircraft

The Timken Company, a maker of bearings and alloy steel, says its net sales increased to $2 billion in the first nine months of the year compared with $1.9 billion a year earlier.

``It also increased pricing pressures in North American steel markets, with European producers exporting into these markets at significantly lower prices,'' Chairman W.R. Timken Jr. said last month. The Canton, Ohio, company is planning to make more bearings at lower cost plants in Central Europe.

Nucor Corp., the No. 4 U.S. steelmaker, said yesterday it cut prices on some steel beams used in construction because of competition from imports.

Aircraft exports rose 1.4 percent in September after falling 1.4 percent in August. Boeing Co. won 60 percent of global orders for large jetliners in the first nine months, reclaiming the lead it lost last year to Airbus Industrie, the only other maker of big commercial jets.

Boeing had 475 orders through Sept. 30 compared with 305 for Airbus. At the same time last year, the European planemaker had 343 orders to Boeing's 154.

Semiconductor Trade

Trade in semiconductors increased, suggesting a growing market for electronic equipment such as cell phones and computer networks. U.S. exports of chips rose 5 percent in September after climbing 2.8 percent in August. Imports rose 11.1 percent after a 4.9 percent gain.

Still, U.S. imports of computers fell 13.1 percent after rising 5.6 percent, while exports fell 4.5 percent after rising 8.9 percent.

Research by the private firm Dataquest Inc. indicates the European market is on pace for computer shipments to reach 35.4 million units this year, up 10 percent from 1999. Shipments should grow to more than 40 million units in 2001, the company said.

Sales of chips to foreign telecommunications companies Ericsson AB, Alcatel SA, and Nortel Networks Corp. helped bring about a more than doubling of profits at Analog Devices Inc. in the quarter that ended Oct. 28. The Norwood, Massachusetts, company last week reported net income of $199.9 million, compared with $73.2 million a year earlier. Analog also announced an announcement to supply chipsets for wireless phones made by Siemens AG.

Country Data

The deficit with China rose to a record $8.7 billion from $8.6 billion. By region, the trade deficit with Japan narrowed to $6.1 billion in September from $6.8 billion during August. The deficit with the Organization of Petroleum Exporting Countries fell to $4.2 billion from $4.4 billion.

Elsewhere, the deficit with Asia's newly industrialized countries rose to $2.8 billion in September. The deficit with Canada, the largest U.S. trading partner, rose to a record $4.7 billion from $4.3 billion. The deficit with Mexico widened to a record $2.7 billion from $1.9 billion. The deficit with Western Europe fell to $4.4 billion from $5.2 billion.

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-- Carl Jenkins (somewherepress@aol.com), November 21, 2000