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December 11, 2010

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Home » Business » Economy

US trade gap falls to lowest in 9 months

THE United States trade deficit fell to its lowest level in nine months, as growing demand for American goods overseas and a falling dollar pushed exports to their highest level in more than two years.

The deficit narrowed to US$38.7 billion in October, the US Commerce Department reported yesterday. The figure was 13.2 percent below September's deficit of US$44.6 billion.

US exports rose 3.2 percent to US$158.7 billion, the highest level since August 2008. Sales of American-made machinery, farm products and autos fueled the growth. Imports dipped 0.5 percent to US$197.4 billion, with lower demand for oil and foreign-made cars.

The dollar's value against many major trading partners has been on a downward trend since March 2009. That has helped boost US exports.

Pierre Ellis, an economist at Decision Economics, said the jump in exports reflected the decline in the dollar and also stronger economic growth in many US export markets.

He said this should help boost overall economic growth in the US in the current quarter. That would be a switch from previous quarters, when the rising trade deficit had been a drag on US growth.

The big rise in exports should be welcome news for the Obama administration, which has set a goal of doubling American exports as part of the administration's strategy to combat painfully high unemployment in the US by boosting the fortunes of American manufacturers.

The deficit with China dropped 8.3 percent to US$25.5 billion in October, the largest imbalance with any country. So far this year, the trade gap with China is running 20.3 percent above last year's level and is on track to match the all-time high set in 2008.

So far this year, the US trade deficit is running at an annual rate of US$504.8 billion, up 34.6 percent from the 2009 imbalance of US$374.9 billion.

Economists had forecast that the deficit would rise as the US economy recovered but the hope is that strong global demand will boost sales of exports and offset some of the increase in imports.

Another hope is that a decline in the dollar against many other currencies will help boost the competitiveness of US exports.

The October increase in exports reflected a US$374 million rise in sales of capital goods led by increases in exports of industrial engines, drilling equipment, computers and telecommunications equipment. Exports of US-made autos and auto parts expanded by US$430 million.

The small decline in imports reflected a 6.7 percent fall in imports of petroleum, which fell US$25.7 billion, the lowest level in 11 months. Imports of autos and various types of machinery also declined in October.




 

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