Trade Gap in U.S. Shrank in October on Record Exports

The trade deficit in the U.S. narrowed in October for the first time in four months as exports climbed to a record.

The gap decreased 5.4 percent to $40.6 billion from a $43 billion shortfall in September that was larger than previously estimated, the Commerce Department reported today in Washington. 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 boost 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 shutdown.

“We are starting to see some recoveries abroad, and in general, stronger global growth is going to lead to a pick-up in export growth over time,” Jay Bryson, global economist at Wells Fargo Securities LLC in Charlotte, N.C., said in an interview. “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.”

Companies boosted payrolls by a more-than-projected 215,000 in November, according to figures today from the ADP Research Institute in Roseland, New Jersey. The median forecast of 40 economists surveyed by Bloomberg called for a 170,000 advance. Estimates ranged from gains of 125,000 to 210,000.

Shares Fall

Stock-index futures dropped after the reports as investors speculated the data would influence the timing of the Federal Reserve’s decision to trim stimulus. The contract on the Standard & Poor’s 500 Index maturing this month fell 0.2 percent to 1,787.4 at 8:47 a.m. in New York.

Bloomberg survey estimates ranged from trade deficits of $38 billion to $43.1 billion. The Commerce Department initially reported a $41.8 billion 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 output may double to 4 million barrels a day by 2020. More domestically produced oil reduces U.S. reliance on imports.

Energy Production

“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 prior 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 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.

U.S. GDP

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 tomorrow. 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.

Other data this week showed manufacturing unexpectedly accelerated in November at the fastest pace in more than two years, a sign factories will be a source of strength for the economy going into next year. The Institute for Supply Management’s index rose to 57.3 from 56.4 a month earlier, according to the Tempe, Arizona-based group’s release on Dec. 2.

The report’s export gauge reached the highest level since February 2012 after climbing in October as well, “which does give some hint that global growth was hanging in there relatively well,” BMO’s Porter said.

Manufacturing Abroad

In Europe, a report this week showed U.K. manufacturing grew the fastest since February 2011, while separate figures indicated the euro-area factory growth expanded faster than initially estimated last month. Today’s report showed U.S. imports from the U.K., France, Germany, Ireland and Italy all climbed.

Chinese manufacturing growth beat analysts’ estimates in November, and Goldman Sachs Group Inc. projects Hong Kong stocks will post the biggest gain since 2009 next year on prospects the economy will stabilize.

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

To contact the reporter on this story: Victoria Stilwell in Washington at vstilwell1@bloomberg.net

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

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