U.S. Trade Gap Narrows

The U.S. trade deficit narrowed in October for the fourth month in a row as strong exports of capital goods and petroleum products amid a broader decline offset a drop in imports.

The U.S. deficit in international trade of goods and services declined 1.6% to $43.47 billion from $44.17 billion the month before, the Commerce Department said Friday. The September trade gap was originally reported as $43.11 billion.

The October deficit was smaller than Wall Street expectations, with economists surveyed by Dow Jones Newswires having predicted a $44.0 billion gap.

Although overall U.S. exports contracted 0.8% to $179.17 billion, the U.S. recorded historic sales abroad of capital goods such as aircraft and industrial machinery and petroleum products.

Imports narrowed 1.0% to $222.64 billion. A fall in crude prices and the amount of oil purchased helped to offset a record imports of food, feed, beverages and capital goods.

Friday's report showed that the average price of imported crude oil fell $2.18 to $98.84 a barrel in October.

The overall tab for crude imports, a major driver of the U.S. trade gap, was $26.01 billion, from $28.30 billion the month before. The U.S. paid $32.60 billion for all types of energy-related imports, down from $35.11 billion in September. The U.S. exported a record level of petroleum products, however, hitting a high of $10.5 billion in October.

Meanwhile, the trade deficit with China was relatively flat on the month at $28.07 billion in October. Exports to the U.S.'s No. 2 trading partner rose 16.4% to $9.74 billion, while imports increased 3.8% to an all-time high of $37.81 billion.

The trade gap with the euro area, however, expanded 7.1% to $6.92 billion in October. The trade deficit with Japan also grew by 19.5% to $6.20 billion.

For other major trading partners, the U.S. registered a sharp decline in the trade gap with its largest trading partner, Canada, with the deficit falling 36.4% to $2.25 billion.

The massive trading gap will likely continue to encourage calls in Congress for action on Beijing's currency policy. Although the U.S. Treasury has repeatedly declined to label China a currency manipulator, it has said the yuan needs to appreciate more rapidly than the gain registered since being taken off the dollar peg over a year ago. Many U.S. lawmakers have been pushing for the Obama administration to take a tougher stance, viewing China's weak currency as an unfair trade advantage and a drumming up support for punitive legislation. The Senate has passed a currency bill targeting Beijing's currency policy, but Republican leadership has been reluctant to take up the bill, concerned it could jeopardize negotiations over other trade frictions the U.S. has with China.

Friday's report showed that the real, or inflation-adjusted deficit, which economists use to measure the impact of trade on GDP, narrowed to $44.19 billion in October from $45.88 billion the month before.

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