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U.S. Trade Deficit Narrowsâ€Ž

11 November 2010 09:26 (UTC +04:00)

Baku â€“ APA-Economics. The U.S. trade deficit shrank in September, and the number of new claims for unemployment insurance fell to their lowest level in two years, both signs that the nation’s economic recovery is gaining strength, Wall Street Journal reported.

The trade deficitâ€”an imbalance in the goods and services coming into and out of the U.S.â€”shrank 5.3% to $44 billion in September, the Commerce Department said Wednesday. Exports hit their highest level in a little over two years, boosted by service-sector exports such as legal work and software consulting. Overall, sales abroad expanded 0.3% to $154.1 billion, the most since August 2008 and up from $153.6 billion the previous month.

Imports fell 1.0% to $198.1 billion from $200.1 billion in August, indicating that demand in the economy remains sluggish. Big contributors included falling oil and auto imports.

Year-to-date, the trade deficit stands at $379.1 billion, up 40% from the same period in 2009.

Still, the September report bodes well for economic growth through the end of the year. Imports from other nationsâ€”which subtract from economic growth because they take away from domestic productionâ€”have been a major drag on the economy in recent months. This factor alone cut by half the rate of growth in U.S. gross domestic product in the July-through-September period, subtracting two percentage points to leave overall growth at a modest 2.0% rate.

The narrower September gap shows imports were a smaller drag than previously thought. That suggests that third-quarter economic growth was faster than the 2.0% pace preliminarily reported by the Commerce Dept. in October.

The U.S. trade deficit with China fell to $27.8 billion. Exports to China declined 1.2% to $7.2 billion, but imports also declinedâ€”a 0.8% drop to $35 billion.

The trade data come as China and other countries are complaining about the Federal Reserve’s decision last week to buy up $600 billion in bonds by the middle of next year; they argue the Fed is trying to push down the value of the dollar by pumping money into the U.S. economy.