Economy Signals Damage Control; Retail Sales Slow, Trade Deficit Falls
Economists have been predicting that consumers would slow their spending but that the damage would be cushioned as U.S. businesses sold more products abroad. Yesterday, there was evidence that both are starting to happen.</br></br>The U.S. trade deficit fell to $57.6 billion in August, and major retailers' sales at stores open at least a year rose a meager 1.7 percent in September from a year earlier, two reports said yesterday.</br></br>Monthly results can be volatile, and economists caution not to read too much into what could turn out to be blips. But taken together, they are indicators of an economy in transition. The weak housing market is making consumers spend their money more carefully. That in turn means that retailers import fewer goods from abroad, lowering the trade deficit.</br></br>Simultaneously, the slower U.S. economy and lower interest rates mean that the dollar is less valuable compared with other currencies than it was a few months ago. That makes U.S. goods cheaper and exporters more competitive than they have been in recent years, creating a source of growth that will ease the pain of the housing crunch.</br></br>"Trade is providing a pretty big offset to the drag of housing," said Brian A. Bethune, an economist with consulting firm Global Insight. "It's not totally offsetting housing, but it is a buffer."