/www.bloomberg.com/ By Siobhan Hughes
Washington, (Bloomberg) -- The U.S. trade deficit fell in October to the narrowest in seven months as a labor dispute closed West Coast ports and companies imported capital goods at the slowest pace in four years.
The $35.1 billion trade gap in goods and services followed a $37.1 billion shortfall in September, the Commerce Department said. Exports fell for a third straight month, and imports declined 2.4 percent. Inbound shipments of computer accessories, telecommunications equipment and semiconductors dropped.
``The electronics business is still in the doldrums,'' said Joel Girsky, chairman of Jaco Electronics Inc. in Hauppage, New York, which distributes imported computer chips and electronic products from such companies as South Korea's Samsung Electronics Co. ``All of our inventories continue to be reduced.''
U.S. imports of capital goods in October dropped to $22.1 billion, the lowest since August 1998, from $23.6 billion. The decline reflects the reluctance of businesses to purchase new equipment until profits grow, economists said. FedEx Corp., the world's largest overnight delivery service, said it plans to reduce its capital spending by $200 million in fiscal 2003.
Fed Ex said today that its revenue increased 10 percent in the September-November quarter in part because the company flew more packages across the Pacific as importers worked around the West Coast port closures. FedEx volume from Asia rose 27 percent.
Capital goods shipments for the month were 7 percent below the monthly average of $23.8 billion in the first nine months of the year.
Markets
U.S. stocks fell for a fourth day in five as a sales report from Micron Technology Inc. lagged estimates and as Bank of New York Co. and Blockbuster Inc. issued disappointing forecasts. The Standard & Poor's index of 500 stocks fell 11.87 points, or 1.3 percent, to close at 891.12. The Dow Jones Industrial Average lost 88.04 points, or 1 percent, to close at 8447.35.
The Treasury's benchmark 4 percent note maturing in November 2012 had its biggest gain in three weeks on speculation the U.S. is moving closer to war with Iraq. The note rose fore than 5/8 point, pushing down the yield 8 basis points to 4.04 percent.
The port shutdown in early October slowed imports of consumer goods from countries such as China, Taiwan and Korea. West Coast ports were closed for 10 days starting Sept. 29 when union workers were locked out by shippers in a labor dispute. President George W. Bush obtained a court order to open the ports before the holiday shopping season.
Shippers complained that even after the shutdown ended Oct. 9, dockworkers intentionally slowed operations in following weeks. The 29 ports in California, Oregon and Washington handle about $300 billion in cargo a year, including imports from Asia for U.S. retailers and manufacturers.
More Imports
``Over the next six months we should see decent import growth because demand is growing and inventories are lean and need to be rebuilt,'' said James O'Sullivan, an economist at UBS Warburg LLC, the third-largest underwriter of U.S. agency debt, in Stamford, Connecticut.
Shipments to the U.S. of consumer goods including toys, clothes, furniture and other consumer goods dropped 4.9 percent to $25 billion in October.
Imports may rise in coming months as port operations return to normal. Pier 1 Imports Inc., the largest retailer of imported home furnishings, said yesterday that sales in the quarter that ended Nov. 30 rose 13.2 percent from a year earlier. A record pace of U.S. home sales over the past two years has boosted demand for home decorations.
Dollar Implications
Also working to widen the deficit in coming months will be faster growth in the U.S. economy than among trading partners, economists said. A persistently large trade shortfall has implications for the dollar and inflation because Americans pay for imports by sending dollars overseas. Foreigners have been willing to reinvest those dollars in the U.S., helping to prop up American financial markets.
If investment shifts to other countries, the dollar may fall in value. That would raise the price of imports, risking an acceleration of inflation. A narrower trade gap lifts gross domestic product because it suggests that domestically produced goods accounted for a greater share of consumer and business spending. All imports fell to $117 billion for the month. They were up from $108.4 billion in October 2001.
The value of crude oil imports rose 18.2 percent to $8 billion in October, reflecting higher prices and increased volume. A barrel of crude oil sold for an average $26.17, the highest since December 2000, compared with a September price of $25.47.
Oil Shipments
The value of oil imports may rise in coming months because prices are close to $30 a barrel. Crude oil for January delivery traded at $30.33 a barrel on the New York Mercantile Exchange yesterday after its biggest daily gain in almost a year because of a national strike in Venezuela, the fourth-biggest supplier of oil to the U.S.
Exports fell 1 percent to $82 billion from $82.8 billion in September. The drop was due to fewer exports of capital goods and autos. Exports were up from $77.5 billion in October 2001.
Exports of commercial aircraft rose 4 percent. Boeing Co., the world's biggest planemaker, shipped 15 planes to foreign customers in October, compared with 12 a month earlier and 14 in August.
By region, the Commerce Department reported that the trade deficit with China narrowed to $9.5 billion for the month from $10.3 billion. The trade deficit with Asia's newly industrialized countries fell to $1.8 billion from $2.1 billion.
The shortfall with Canada, the largest U.S. trading partner, narrowed to $4.3 billion from $4.6 billion. The gap with Mexico widened to $3.5 billion from $3 billion.