Economy Trade deficit shrinks for fourth straight month

By Christopher S. Rugaber AP Economics Writer WASHINGTON (AP) -- The U.S. trade deficit narrowed in October to its lowest point of the year after Americans bought fewer foreign cars and imported less oil. The shrinking trade gap boosted growth over the summer and may do so again in the final three months of the year. The Commerce Department said Friday that the trade deficit shrank 1.6 percent to $43.5 billion. It was the fourth straight monthly decline. Overall imports fell 1 percent to $222.6 billion, which largely reflected a 5 percent decline in oil imports. The average price of imported oil fell for the fifth straight month to the lowest level since March. Oil prices rose last winter because of turmoil in the Middle East and North Africa. Exports slipped 0.8 percent to $179.2 billion, the first drop after three months of gains. Shipments of industrial supplies, such as natural gas, copper and chemicals, fell. Exports of autos and agricultural goods also dropped. A lower deficit is the latest sign that the economy has rebounded after nearly stalling in the spring. It can boosts economic growth because it typically means foreign nations are buying more American goods. That can lead to more jobs and higher consumer spending, which fuels 70 percent of economic activity. But economists expect the trend toward a narrower deficit could reverse in the coming months. Oil prices are increasing and Europe is likely to import fewer U.S. goods as its economy weakens. At the same time, U.S. businesses are stocking up on foreign goods as consumer demand improves. "Exports to Europe are bound to weaken substantially, while imports will pick up steam as U.S. companies rebuild inventory," Ian Shepherdson, chief U.S. economist at High Frequency Economics, said in a note to clients. Imports of consumer goods increased in October, as retailers stocked up for the holiday shopping season. The U.S. imported more televisions, toys and games, audio equipment and other household goods. Pharmaceutical imports also increased. Imports of industrial equipment, such as computers, aircraft and electrical equipment, also increased. That suggests companies are investing more in capital goods, a good sign for economic growth. Through October the deficit is running at a $558.3 billion annual pace, 11.6 percent higher than last year's imbalance of $500 billion. The deficit shrank every month in the July-September quarter, as exports grew. That contributed almost a half-point to the economy's 2 percent annual growth rate in the quarter. Economists expect slightly stronger growth in the final three months of the year. Recent data show the economy has strengthened this fall and hiring has picked up. Employers added a net total of 120,000 jobs last month. The economy has generated 100,000 or more jobs five months in a row -- the first time that has happened since April 2006. The unemployment rate fell in November to 8.6 percent, its lowest level in two and a half years. Half of that the drop reflected a growing number of people who gave up looking for work and were no longer counted as unemployed. Still, the number of people seeking unemployment benefits has steadily declined over the past three months, a positive sign for future hiring. Published: Mon, Dec 12, 2011