WASHINGTON – The U.S. trade deficit fell slightly in October as exports rebounded while oil imports dipped to the lowest level in five years.
The deficit edged down 0.4 per cent to $43.4 billion, a drop from a revised $43.6 billion in September, the Commerce Department reported Friday.
Exports climbed 1.2 per cent to $197.5 billion, recovering after a September dip. Imports were up as well, rising 0.9 per cent to $241 billion but that increase was tempered by a 0.6 per cent fall in imports of petroleum, which dropped to the lowest level since November 2009. The average price of a barrel of oil dipped to $88.47, the lowest point since February 2011.
Through October, the deficit is running 4.8 per cent below the same period in 2013. A lower deficit provides a boost to economic growth.
Paul Dales, senior economist at Capital Economics, said that trade, which added to overall growth in the July-September period may be a slight negative in the current quarter as imports end up growing faster than exports.
He said that the October performance suggests that exports will grow at an 8 per cent rate in the fourth quarter while imports will grow at a slightly faster 10 per cent rate. Dales said this could result in overall economic growth coming in close to 2.5 per cent in the fourth quarter, down from third quarter growth of 3.9 per cent.
The lower trade deficit so far this year reflects the gains made in U.S. export sales, which have climbed to record levels, giving a boost to American manufacturers. But there is a concern that economic weakness in Europe and other key export markets could hold back future gains in exports. The U.S. dollar has also been rising in value against other major currencies and this could jeopardize export sales as well by making American products more expensive in overseas markets.
The big drop in global oil prices in recent months helps to lower America’s foreign oil bill but it also depresses export sales since a U.S. energy production boom has been pushing U.S. petroleum exports to record levels.
For October, petroleum imports dropped to $26.2 billion while exports of petroleum were down 11.1 per cent to $11 billion, a fall that reflected lower prices.
For the year, U.S. energy exports are up 12.1 per cent compared to last year, putting them on track to hit a record, even with the recent fall in prices.
The politically sensitive deficit with China narrowed by 8.5 per cent to $32.6 billion in October, down from a monthly record of $35.6 billion in September. The release of the new Apple iPhone likely fueled much of the surge in imports during the month.
The deficit with China is on track to set another record for the full year, creating more pressure for Congress and the Obama administration to curb what critics contend are unfair tactics such as currency manipulation that they contend China is employing to gain trade advantages over U.S. companies.
The widening trade gap with China is coming at a time when the Obama administration hopes to finally get Congress to approve the fast-track authority it needs to wrap up a major 12-nation trade agreement with Pacific Rim countries known as the Trans-Pacific Partnership.
The administration sees the trade deal as one of the areas where President Barack Obama may be able to find common ground with Republicans who will control both the House and Senate in the new Congress.