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June 19, 2006

Some good news on the trade deficit

After years of bad news about America’s trade deficit, N.C. State University economist Mike Walden says there's now something to smile about. Listen

"In the latest reading that we have for the trade deficit, we see that it actually leveled off," says Dr. Walden, a specialist with the North Carolina Cooperative Extension Service.

"It did not go up. Now it didn’t go down either. But it stayed the same. And in fact what we’ve seen recently … is our exports -- that is, products and services that U.S. companies sell overseas -- have been rising actually faster than imports. So this is good news.

"Now, some of this is probably the result of the dollar falling. The dollar is now down 10 percent in its value against major currencies of the world in the last 5 years.

"So what this does is ... [make] imports coming into our country more expensive; therefore, U.S. consumers perhaps will reduce their purchases of imports. But it also makes our exports cheaper. And we should see our exports go up. And all this has really happened.

"Now one downside, however, of a lowered valued dollar is it can lead to higher domestic inflation, and we have actually seen that, too."

Posted by deeshore at June 19, 2006 08:28 AM