The U.S. trade deficit narrowed in October to a 10-month low of $43.5 billion despite imports from China hitting a record high, the Commerce Department said Friday, also revising its estimate of the September trade deficit to $44.2 billion from $43.1 billion.
The October trade gap narrowed 1.6 percent from September instead of widening, as most analysts had expected. Both imports and exports declined in October, in a possible sign of weakening demand both in the U.S. and abroad.
Still, the smaller trade deficit suggests more domestic demand is being met by U.S. production — a positive sign for fourth-quarter economic growth.
Imports and exports of capital goods set records in October, indicating that businesses are gearing up operations.
U.S. imports to the 27-nation European Union rose 1.0 percent in October to $23.4 billion, while imports from the EU increased 6.3 percent to $31.4 billion.
“Exports to Europe are bound to weaken substantially, while imports will pick up steam as U.S. companies rebuild inventory after the unexpected decline in the third quarter,” said Ian Shepherdson, chief U.S. economist at High Frequency Economics in Valhalla, New York.
U.S. imports fell 1.0 percent to $222.6 billion, led by a $3.7 billion drop in industrial supplies and materials imports. Also contributing to the decline were lower oil prices, down from a May peak of $108.70 to $98.84 per barrel in October, its fifth consecutive monthly decline.
The drop in the overall trade deficit “will prove temporary, because oil prices have risen significantly since October,” Shepherdson said.
Despite an overall decline in imports, the U.S. increased imports of capital goods and food, feeds, and beverages to records in October. Imports from China rose to a record $37.8 billion, while imports from Japan increased to $12.3 billion, the highest since April 2008.
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Exports fell by 0.8 percent to $179.2 billion, led by a $1.3 billion drop in industrial supplies and materials shipments. U.S. exports to China increased to $9.7 billion, the highest since December of last year. The U.S. trade gap with China was unchanged in October at $28.1 billion.