US trade gap narrows 7.6% to $47.2 billion in October

Daniel Fowler
December 6, 2019

The latest data suggested the economy was growing at a moderate pace rather than stall speed.

The overall trade deficit tumbled 7.6 per cent to US$47.2 billion (S$64.3 billion) in October - below what economists had been expecting and the lowest level since May previous year - from US$51.1 billion in September, the report showed.

The trade gap is still 1.3 percent wider so far this year than it was in January-October 2018, despite dropping in September and October.

Analysts at Wells Fargo point out the trade deficit narrowed as imports declined faster than exports.

Economists polled by MarketWatch had forecast a $48.5 billion gap.

The U.S. imported fewer drugs, cell phones, electronics, clothing and toys and other goods, much of it from China.

Reducing the deficit - central goal of President Donald Trump's aggressive trade agenda - reflected to the decline in the worldwide exchange of goods and services as the global economy weakens. Trump has accused trading partners, including China, the European Union, Brazil and Argentina of devaluing their currencies at the expense of USA manufacturers.

In October, the United States ran a $68 billion deficit in the trade of goods such as autos and appliances.

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The dollar was weaker against a basket of currencies, while U.S. Treasury yields rose.

The U.S. has a trade surplus with Brazil, which swelled in October to its highest level since March 2014.

Trade tensions have undermined business investment, which together with slowing growth overseas has led to a recession in manufacturing.

Inflation-adjusted petroleum exports rose to a record $23.9 billion, narrowing the real trade gap for petroleum to $4.1 billion.

There are, however, no signs the trade war is significantly impacting the labor market. It suggested trade could add to GDP growth in the fourth quarter after being a drag for two straight quarters. If it persists through December, the smaller gap could give a boost to gross domestic product in the fourth quarter.

Frank Sonzala, chief executive of South Gate, Calif. -based chassis trailer manufacturer CIMC Intermodal Equipment, said production has been held back by an overall slowdown in the trucking and intermodal industry in the third quarter, mostly caused by a jump in tariffs on Chinese products to 25% in August. Exports dipped 0.2 percent to $207.1 billion on a drop in sales of soybeans and aircraft engines. Exports to China were down 19.3% at C$1.6 billion, the biggest decrease since 2012 and the lowest level in more than five years. "The good news is that it helped narrow the deficit, but it could also signal weakness in domestic demand".

The U.S. on September 1 imposed new tariffs on about $111 billion in products, including for the first time some consumer goods like apparel, tools, electronics and other consumer goods from China.

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