U.S. Trade Gap Strait more than estimated as exports hit in two years

The U.S. trade deficit shrank more than expected in October that a weaker dollar and growing economies boosted exports abroad to a maximum of two years.

The gap narrowed 13 percent to 38.7 billion U.S. dollars, less than the lowest estimate of 78 economists surveyed by us and the smallest since January, Commerce Department figures showed today in Washington. Exports were the strongest since August 2008 as Mexico and China bought record amounts of U.S. products.

3M Co. and General Dynamics Corp. are among the companies likely to benefit from growing demand in markets such as China, Brazil and South Korea, which this year are among the top 10 purchasers of goods manufactured in the U.S.. Imports were flat in October as U.S. demand Crude oil fell for a result that can be temporary, as the U.S. economy recovers.

"Exports continue to do so the weaker dollar and strong growth in emerging markets are helping," said Nariman Behravesh, chief economist at IHS Inc. in Lexington, Massachusetts, which provides that the trade deficit would be reduced. "Things are improving the economy so we expect to see imports pick up too. We'll have an export-led growth in the U.S. next year as exports grow faster than imports."

Stocks rose, led by rising shares of commodity producers in the growing evidence that global demand is improving. 500 of Standard & Poor's rose 0.2 percent to 1,235.82 at 9:44 am in New York. Treasuries fell, bringing the yield on the benchmark 10-year to 3.27 percent from 3.21 percent late yesterday.

Increased costs

Another report showed that the cost of imported goods in the U.S. increased in November by the largest amount in one year, led by increases in the prices of commodities such as fuels, agricultural products and metals. The 1.3 percent increase in the import price index and exceeded the median forecast in a survey and followed a revised 1 percent gain in October, showed Labor Department figures.

The trade deficit was projected to be little changed at 43.8 billion U.S. dollars from the beginning reported $ 44 billion in September, according to the median forecast of economists surveyed. Estimates ranged from deficits of 39.5 billion U.S. dollars to 46.6 billion U.S. dollars. The Commerce Department revised the September deficit to 44.6 billion U.S. dollars.

After eliminating the influence of prices, which are the numbers used to calculate gross domestic product, the trade deficit narrowed to 45.2 billion, the lowest since April, from $ 50,300,000,000. The figure was lower than the average for the third quarter, indicating trade contribute to growth this quarter.

Overseas sales

Exports rose 3.2 percent to 158.7 billion U.S. dollars, boosted by sales of food, cars, engines and industrial supplies such as fuel oil and natural gas.

Since reaching a maximum of one year on 7 June, the dollar has fallen 6.6 percent against a trade-weighted basket of currencies. The decline makes American products cheaper for overseas buyers and keep encouraging the production, which was extended for a month straight in November sixteenth.

Growing economies abroad are also contributing to the demand for U.S. goods. China become the second largest economy in the world this year, a gain of 9.6 percent in the third quarter gross domestic product a year ago. Singapore, in the race to be the fastest growing economy in the world this year, it expanded 10.6 percent while Brazil, South America's largest economy, grew 6.7 percent.

Manufacturers benefit

General Dynamics, headquartered in Falls Church, Virginia, is seeing "a strong international order activity and interest, especially in emerging markets," said CEO Jay Johnson in a December 2 conference presentation in the industry.

St. Paul, Minnesota-based 3M, the maker of Scotch tape and film to illuminate television screens, is expanding in emerging markets, which constitute one third of its sales and can go up to 45 percent by 2015, according to company estimates.

"These opportunities for growth," said George W. Buckley, executive director, in a conference call on December 7. overseas sales will benefit from the "India and Latin America, gaining momentum in a sort of China-like style."

President Barack Obama is seeking to double U.S. exports over the next five years. The Commerce Department has asked industry groups to revise its proposal to relax controls on export of technology with military applications, which covers sales to 37 allies, including Germany, Japan and Canada.

Less crude oil

Imports fell 0.5 percent to 197.4 billion U.S. dollars to 198.4 billion U.S. dollars in the previous month. The value of purchases of crude oil fell to 18.9 billion U.S. dollars of $ 21 billion in September, the lowest level since February swamped an increase in fuel costs.

The trade deficit with China dropped to $ 25.5 billion from $ 27,800,000,000.

China's trade surplus with the U.S. remains a thorny issue as some members of Congress accuse the Asian nation of keeping its currency too low to boost sales abroad. The yuan's advance of 0.1 percent last month and 0.3 percent in October dropped below the 1.7 percent rise in September that Treasury Secretary Timothy F. Geithner said was appropriate.

China today reported a monthly trade surplus of $ 22.9 million in November, beating the median forecast in a  survey. The excess of exports to the United States on imports was about 16.7 billion U.S. dollars, equivalent to about three quarters of the total.

Improving U.S. demand and the need to replenish stocks led the gains in imports that flooded the increase in exports over the past two quarters. An increase in the deficit subtracted 1.76 percentage points of GDP in the third quarter the economy expanded at a rate of 2.5 percent.

Imports are likely to grow at a slower rate than inventories are better aligned with sales, indicating that the deficit will stabilize and the trade can no longer be an obstacle to the GDP.