October U.S. Trade Deficit Narrowed as Exports Rose

http://www.nytimes.com/2009/12/11/business/economy/11econ.html?ref=business



By JAVIER C. HERNANDEZ
Published: December 10, 2009
The United States trade deficit narrowed unexpectedly in October, the government said Thursday, helped by a surge in exports like cars and computers and a drop in demand for foreign oil.


As countries struggled to sustain a recovery, the 2.6 percent rise in exports surprised some analysts. The increase helped bring the trade deficit down 7.6 percent in October, the Commerce Department said, and it is expected to help drive economic expansion in the last part of 2009.

But economists cautioned that October might be an exception caused by the extraordinary drop in oil imports. Long-term, the trade balance, which measures the difference between the value of imports and exports, will swell in the next several months as demand for oil returns to higher levels and as exports remain steady.

The country imported $17.44 billion in oil in October, a decline of $2.o7 billion from September. The decrease was the product of weaker demand — 27.4 million fewer barrels — and a 78-cent drop in the price. Excluding oil imports, which can be volatile from month to month, imports rose 2.9 percent.

“Growth both here and abroad is quite firm in the fourth quarter, and that’s an important sign of recovery,” said Dean Maki, chief United States economist at Barclays Capital. “Still, we don’t think this month’s decline reflects the underlying trend.”

The more significant number, Mr. Maki said, was the annual rate of growth for imports and exports. Both increased at a pace of about 25 percent in the last three months, leaving the trade deficit relatively unchanged.

The trade gap fell to $32.9 billion in October from $35.7 billion in September. After months of stagnation, exports climbed $3.7 billion in October, reaching the highest level in almost a year, while imports increased $0.7 billion. The gains in exports were broad-based, led by computers, automobiles and semiconductors.

The trade gap has fallen significantly in the last year, totaling $59.4 billion in October 2008. Exports were also helped by a weaker dollar, which is making American products cheaper overseas while, in the United States, driving up the price of everything from Italian cheese to Japanese cars.

“The lower dollar means there is scope for exports to rise at a faster rate,” Capital Economics, a Toronto-based research firm, said in a research note on Thursday.

Julia Coronado, senior United States economist at BNP Paribas, said strong recoveries in emerging markets could eventually help reduce the deficit. But monetary restrictions in places like China, she said, were hurting the competitiveness of American products, making the gap difficult to reduce.

“It’s a good sign that both imports and exports are picking up — that’s an indication that the economy has normalized,” Ms. Coronado said. “But as long as misaligned currencies, like China’s undervalued currency, are there, you’re not going to see a closing of the trade imbalance.”

Ms. Coronado said she expected to continue to see increases in exports of goods like computer equipment, commercial aircraft, and agricultural machinery, as businesses in emerging countries grow.

In its note, Capital Economic said that the strength of exports in October would probably help speed the rate of expansion in the fourth quarter to 3 percent.

In the third quarter, the economy expanded at a rate of 2.8 percent, but it was held back by a swelling trade deficit.

In other economic news, the number of newly laid-off workers filing for unemployment benefits rose unexpectedly by 17,000 last week.

That comes against the backdrop of signs of stability in the jobs market, with the economy shedding only 11,000 jobs last month. Still, the unemployment rate remains at 10 percent. The Labor Department attributed the unexpected rise in part to a rush of claims after the Thanksgiving holiday, when employment offices were closed.