updated 12/16/2003 11:35:50 AM ET 2003-12-16T16:35:50

The deficit in the nation's broadest measure of foreign trade fell slightly to $135.04 billion this summer after setting an all-time high in the spring, the Commerce Department said Tuesday.

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The drop in the current account trade deficit in the July-September quarter reflected a 3.1 percent improvement from a record quarterly deficit of $139.39 billion set in the April-June period.

Even with the small improvement in the third quarter, the country is well on its way to setting an all-time record deficit for the year of more than $500 billion in the current account.

The current account is the broadest measure of trade because it covers not only trade in goods and services but also investment earnings and foreign aid.

The country's soaring trade deficit has proven to be a major political headache for President Bush with his Democratic presidential opponents charging that the record deficits reflect the administration's failed economic policies.

The improvement in the current account balance in the July-September period reflected a better showing in all of the major categories.

The deficit in goods declined by 1.3 percent to $136.23 billion in the third quarter. U.S. exports rose in the third quarter, offsetting a further increase in imports that mainly reflected higher American demand for foreign oil.

The U.S. surplus in services, which covers such things as travel and banking and insurance climbed to $14.92 billion in the third quarter, an increase of 7.3 percent over the April-June quarter.

In addition, Americans earned $2.60 billion more on their foreign investments than foreigners earned on their U.S. investments during the third quarter. And unilateral transfers, a category that includes foreign aid, dropped to $16.32 billion in the third quarter.

Economists are concerned with the size of the current account deficit because it reflects the amount of money the country must obtain from foreigners to finance the shortfall between what American consumers are purchasing in foreign products and the amount being earned from U.S. export sales.

Copyright 2003 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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