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Washington: Cheaper imported oil helped shrink the US trade deficit in August, normally a boost for economic growth but this time not enough to tamp down fear that financial turmoil has already set in train a major downturn.
"With global credit markets now frozen and stock markets crashing, the US can no longer look to foreign trade to prevent what is shaping up as a severe recession," said Nigel Gault, chief US economist at Global Insight.
Trade has been a bright spot in the US economy, helping fuel nearly two-thirds of economic growth over the past year as consumer spending and business investment has dwindled.
The August trade gap, which narrowed 3.5 per cent from July to $59.1 billion (Dh217.1 billion), suggests trade could keep US economic growth in positive territory in the third quarter, Gault said.
After that, "trade will no longer be able to keep growth in the black," he said.
But Ian Shepherdson, chief US economist with High Frequency Econ-omics, said he expected a 1 per cent drop in third-quarter US economic output even though the contribution of exports should remain strong "for a few more months".
Both imports and exports retreated in August from records set in July. The 2 per cent drop for exports was the biggest in more than four years and would have been larger if not for a big jump in civilian aircraft shipments.
Investors paid scant attention to the report as the carnage on Wall Street continued.
US stocks fell for an eighth day on Friday. A dramatic late-day comeback stalled out and both the Dow and the S&P 500 finished down 18 per cent for the week.
US crude oil future prices plunged more than 10 per cent to close at $77.70 per barrel, the lowest since September 2007, on fears of a global recession that will crimp demand.
After a huge run-up beginning in early 2007, the average price for imported oil dropped to $119.99 per barrel in August from a record of $124.66 in July.
A drop in volume also helped cut the monthly oil import bill to $37 billion, the first drop in six months. A Labour Department report on Friday showed oil import prices fell another 9 per cent in September.
Drop in import prices
That was the chief factor in a 3 per cent drop in overall import prices last month, the biggest one-month decline in 5 years, the department said.
US export prices dropped one per cent in September, the second consecutive decline after rising for 21 consecutive months, as inflation pressures have subsided in the wake of softer consumer demand.
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