US trade figures signal new downturn

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WASHINGTON (Reuter) - Fear of a deeper recession in the US has been heightened by new figures showing a terrible trade performance and a weakening industrial sector.

With exports slumping, the country's trade deficit shot up by 24 per cent from July to dollars 9bn ( pounds 5.5bn), the largest trade gap in 21 months, since a dollars 9.5bn deficit in November 1990, the Commerce Department said. Separately, the Federal Reserve Board said industrial production softened for the second month in a row during September, down 0.2 per cent after a 0.4 per cent August fall.

Output of durable goods like televisions and air conditioners slumped, and non-durable goods like clothing and food were flat. Factories operated at their slackest pace in six months, down to 78.4 per cent of capacity from 78.7 per cent in August.

'The risk of a renewed recession looms higher according to this data,' said Allen Sinai, an economist with Boston Co in New York.

'Most striking was the slippage in exports, because it highlights the risk to the United States of stagnant economies overseas. It raises the question whether weakness overseas is pulling the US economy down.'

Exports fell by 6.1 per cent to dollars 35.51bn, the sharpest monthly fall in foreign sales since a 6.9 per cent drop in August 1987. Imports also declined, but only by 1.3 per cent as the limp recovery helped curb demand for Japanese cars and other foreign-made items.

President Bush stressed the importance of strong exports during a debate with the Democratic presidential contender Bill Clinton and the independent Ross Perot on Thursday night.

'The thing that saved us in this global economic slowdown has been our exports, and what I'm trying to do is increase our exports,' Mr Bush said.

The deficit in the first eight months this year was running at about dollars 78bn, much deeper than the shortfall of dollars 65.4bn recorded for all of 1991.