U.S. trade gap narrows by 5.4%

WASHINGTON - The U.S. trade deficit narrowed in October for the first time in four months as exports climbed to a record, the Commerce Department reported Wednesday.

The trade gap decreased 5.4 percent to $40.6 billion from a $43 billion shortfall in September that was larger than previously estimated. The median forecast in a Bloomberg survey of 63 economists called for a$40 billion deficit.

Sales of goods to China, Canada and Mexico were the highest ever, pointing to improving global demand that will benefit American manufacturers. In addition, an expanding U.S. economy is helping spur growth abroad as purchases of products from the European Union also climbed to a record in October even as fiscal gridlock prompted a partial federal government shutdown.

“We are starting to see some recoveries abroad, and in general, stronger global growth is going to lead to a pickup in export growth over time,” said Jay Bryson, global economist at Wells Fargo Securities in Charlotte, N.C. “Consumers are two-thirds of the economy, and consumer spending continues to grind higher. All components of domestic demand outside of the government are growing.”

Bloomberg survey estimates ranged from trade deficits of $38 billion to $43.1 billion. The Commerce Department initially reported a $41.8billion shortfall for September.

Exports climbed 1.8 percent to $192.7 billion on growing sales of food, petroleum products, drilling equipment and consumer goods, including jewelry.

Companies such as Hess Corp. are seeing the results of increased energy production in the U.S., with the New York based oil company predicting the country’s shale oil output may double to 4 million barrels a day by 2020. More domestically produced oil reduces U.S.reliance on imports.

“The U.S. is doing a lot of good for its own economy,” Chief Executive Officer John Hess said Nov. 21 at the Bank of America Merrill Lynch Global Energy Conference. “But it’s also helping the world and basically enhancing and strengthening and extending surplus capacity to deal with any other supply interruptions.”

The petroleum deficit shrank to $10.5 billion in October from $11 billion the previous month after adjusting for inflation.

Imports increased 0.4 percent to $233.3 billion in October, the most since March 2012. Gains in consumer goods such as toys and artwork, and in fuel helped offset a slump in purchases of foreign automobiles.

After eliminating the influence of prices, the trade deficit narrowed to $48.3 billion in October. That is little changed from the third-quarter average of $48.7 billion, indicating trade is so far having minimal effect on fourth-quarter gross domestic product.

The U.S. economy expanded more than initially reported in the third quarter, with GDP rising at a 3.1 percent annualized rate, according to the median estimate of economists in a Bloomberg survey before the Commerce Department report today. An initial reading showed a 2.8 percent rate of expansion in the three months ended September.

Economists project slower growth of 1.8 percent in the fourth quarter, according to data compiled by Bloomberg, as businesses rein in surging inventories.

The trade gap with China, the world’s second-biggest economy, narrowed to $28.9billion from $30.5 billion in September on the record U.S. exports, Wednesday’s report showed. Imports from China also were the most ever.

Global GDP is projected to expand 2 percent this year, down from 2.2 percent in 2010 and the smallest gain since it contracted during 2009 in the aftermath of the financial crisis. Information for this article was contributed by Alex Tanzi of Bloomberg News.