U.S. Trade Gap Narrows, Jobless Claims Fall in Signs of Improving Growth

The U.S. trade deficit unexpectedly narrowed in September on record exports and jobless claims fell to a seven-month low, indicating the world’s largest economy may be poised to strengthen.

The trade shortfall shrank 4 percent to $43.1 billion from a revised $44.9 billion in August that was smaller than initially reported, the Commerce Department said in Washington. First-time applications for unemployment benefits declined by 10,000 to 390,000 last week, the Labor Department said.

The smaller trade bill may contribute more to the rebound in third-quarter growth than first estimated as overseas demand encourages U.S. factories to boost production. A sustained decline in applications for unemployment benefits may be the first step to a pickup in hiring that’s needed to spur household purchases, the biggest part of the economy.

“The economy is clearly regaining its footing,” said Millan Mulraine, a senior U.S. strategist at TD Securities in New York, who predicted the trade deficit would shrink and jobless claims would decline. “While global economic activity is slowing, it hasn’t collapsed, so the U.S. will be able to sustain healthy gains in exports. The deceleration in the pace of layoffs is positive for the outlook on consumer spending.”

Stocks rose after the reports, rebounding from yesterday’s slump. The Standard & Poor’s 500 Index added 0.9 percent to 1,233.7 at the close in New York. The yield on the benchmark 10- year Treasury note rose to 2.06 percent from 1.96 percent late yesterday.

Imports rose 0.3 percent in September, while exports climbed 1.4 percent.

Adjusting for Inflation

After eliminating the influence of prices to render the figures used in calculating gross domestic product, the trade deficit averaged $45.8 billion in the third quarter. The number was less than the $47.2 billion deficit average in the second quarter.

Economists at Capital Economics Ltd. and International Strategy & Investment were among those who raised their tracking estimates for third-quarter growth.

Before today’s release, Commerce Department figures last month showed a narrower deficit contributed 0.2 percentage point to the 2.5 percent increase in third-quarter economic growth.

Paul Dales, senior U.S. economist at Capital Economics, said in an e-mail that GDP from July through September may be revised up to as high as 2.8 percent. The economists at ISI said the figure may be 2.9 percent at an annual rate.

Paring Inventories

Because the slowdown in imports coincided with less inventory investment, some other economists revised down their third-quarter GDP forecast. Combined with a report yesterday showing a 0.1 percent drop in wholesale inventories, economists at Credit Suisse and Deutsche Bank Securities revised their tracking estimates lower.

A $46 billion trade gap was projected for September after an initially reported $45.6 billion in August, according to the median forecast of 76 economists surveyed by Bloomberg News. Estimates ranged from deficits of $42 billion to $49.5 billion.

Exports climbed to $180.4 billion in September from $177.9 billion, boosted by overseas shipments of industrial supplies, capital equipment, automobiles and consumer goods.

Rockwell Automation Inc. (ROK), the Milwaukee-based maker of factory-automation software and products, this week projected 2012 sales growth may exceed analysts’ estimates on demand from automobile, food and beverage producers.

Overseas Demand

“There is an ongoing need for automation investment in developed markets,” Chief Executive Officer Keith Nosbusch said on a conference call. “In emerging markets, the case for automation is even more compelling. There still is a need for infrastructure investment.”

The gain in imports was led by automobiles, food and industrial supplies such as metals and petroleum products. The U.S. imported less crude oil in September even as the cost declined.

The average price of a barrel of imported oil was $101.02 compared with $102.62 in August, today’s report showed. U.S. companies imported about 280 million barrels in September, the fewest in four months.

Imports of consumer goods, including toys, clothing and cookware, declined in September, a month when retailers start getting ready for the holiday shopping season. As a result, the trade gap with China shrank 3.1 percent to $28.1 billion.

Consumer confidence was little improved last week at a level that’s within reach of an all-time low as Americans stayed pessimistic about the economy and their personal finances, a report showed today.

Consumer Sentiment

The Bloomberg Consumer Comfort Index was minus 51.6 in the period ended Nov. 6 after the prior week’s minus 53.2, the second-lowest reading in almost 26 years of data. The gain was within the survey’s three-point margin of error. The measure is close to the minus 54 in January 2009, which matched the worst reading in the history of the series dating back to 1985.

Shoppers at stores from Best Buy Co. to Gap Inc. and Toys “R” Us Inc. all said they’ll spend less this holiday season than last year, according to a poll conducted last month by Worthington, Ohio-based BIGresearch, whose consulting arm conducted the poll by New York-based Brand Keys released last month. Only half of shoppers plan to buy electronics, a 10 percentage-point decline from last year, according to another survey by Brand Keys.

Trade in vehicles and parts was boosted by the ongoing restoration of Japan auto-supply chains following the tsunami and earthquake earlier in the year. Still, recent flooding in Thailand may crimp imports from Japanese- and U.S.-owned factories in the Southeast Asian country at the end of the year.

The deficit with Canada widened to $3.5 billion, while the gap with Mexico narrowed to $5 billion. The shortfall with the European Union shrank to $6.4 billion in September after $9 billion a month earlier. The U.S. had a $1.2 billion surplus with Brazil.

To contact the reporter on this story: Bob Willis in Washington at bwillis@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net

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