Exports aided by weaker dollar
By Greg Robb, MarketWatch
WASHINGTON (MarketWatch) -- The U.S. trade deficit narrowed sharply in October, as exports were powered by the weaker dollar and imports slowed to a crawl.
The nation's trade deficit shrank 7.6% in October to $32.9 billion from $35.7 billion in September, the Commerce Department said. The September trade gap had been reported at $36.5 billion.
The narrowing of the deficit was unexpected. Analysts surveyed by MarketWatch had expected the deficit to widen to $37 billion.
The lower deficit also eases fears that the trade balance would deteriorate sharply after the deficit widened sharply last month.
During this recession there has been a sharp drop in international trade that led to a substantial improvement in the U.S. trade deficit.
For example, the deficit for the year now totals $304 billion, down sharply from $610.8 billion in the same period one year ago.
This improvement should reverse as production and trade activity normalize, economists at BNP Paribas said.
There are signs that this process is underway. Trade activity with major trading partners - Canada, Mexico, the European Union and China, is at the highest level in October since late last year, prior to the sudden, sharp, drop in trade.
The key question remains to what extent the improvement in the trade balance reverses.
U.S. officials don't want to go back to a global trading system where the U.S. is the importer-for-the-world. They want Europe and China to develop their domestic consumer markets and not rely on exports to the U.S. for growth.
So far, signs of a new trading regime are in short supply.
The U.S. trade deficit with China continues to march higher, hitting $22.7 billion in October compared with $22.1 billion in September. This is the highest level since last November. For the year, the deficit with China is now $188.5 billion.
