WASHINGTON- The US trade deficit narrowed sharply in October as exports soared to a record high, potentially setting up trade to contribute to economic growth this quarter for the first time in more than a year.
The report from the Commerce Department on Tuesday, which also showed imports rising to an all-time high, added to a tightening labor market, strong consumer spending as well as services and manufacturing activity that have suggested an acceleration in growth was underway as the year winds down.
“The trade deficit is narrowing big time and pouring even more fuel into the economy’s tank which guarantees stronger growth as 2021 comes to an end,” said Christopher Rupkey, chief economist at FWDBONDS in New York. “The brightening trade picture is additional evidence that the economy is very strong.”
The trade gap plunged 17.6 percent to a six-month low of $67.1 billion. That was the biggest percentage drop since April 2015, reflecting an increase in the flow of goods and services following disruptions caused by the COVID-19 pandemic.
Economists polled by Reuters had forecast a $66.8 billion deficit. Exports accelerated 8.1 percent to an all-time high of $223.6 billion. The surge was led by goods exports, which soared 11.1 percent to $158.7 billion, also a record high.
Exports of industrial supplies and materials increased $6.4 billion, with shipments of crude oil advancing $1.2 billion.
Petroleum exports were the highest on record.
Capital goods exports increased $3.1 billion, boosted by other industrial machines as well as civilian aircraft. Food exports rose by $2.1 billion, with soybeans increasing $1.8 billion.
Exports of consumer goods jumped $1.6 billion, lifted by increases in shipments of gem diamonds as well as motor vehicles, parts and engines.
The nation exported more services, which rose $1.0 billion to $64.9 billion. That reflected a rise in overseas travel, other business services and charges for the use of intellectual property. Further gains are likely after the United States reopened its borders to international travelers in early November after a 20-month ban.
The Omicron variant of the coronavirus could, however, temporarily slow international travel following recent restrictions on travelers from southern African countries.
“While international travel activity could be dampened again later in the month with the emergence of the Omicron variant, we expect a continued normalization of travel through 2022,” said Veronica Clark, an economist at Citigroup in New York. — Reuters
