The trade gap narrowed to $40.6 billion in October, the Commerce Department said Wednesday. That’s 5.4 percent lower than the September gap of $43 billion, which was higher than initially estimated.
Exports rose 1.8 percent to a record $192.7 billion, buoyed by a 6 percent gain in petroleum exports. Imports rose 0.4 percent to $233.3 billion, the highest since March 2012. Oil imports rose 1.5 percent.
The U.S. is benefiting from an energy revival, which has lessened its dependence on foreign oil. U.S. petroleum exports are up 9.3 percent in the first 10 months of this year compared with the same period in 2012. At the same time, petroleum imports are down 11.1 percent. The drop in oil imports has been helped by lower global prices.
A smaller trade deficit can boost economic growth. It typically shows that American companies are earning more from sales overseas while U.S. consumers are buying fewer products from their foreign competitors.
Through October, the deficit is running 10.6 percent below last year’s pace. The deficit is smaller because exports have risen 2.7 percent while imports are basically running at the same pace as last year.
The overall economy grew at an annual rate of 2.8 percent in the July-September quarter. That figure will be revised on Thursday and many analysts believe growth will be boosted to a 3.1 percent rate.
However, much of the third-quarter strength came from a buildup in business stockpiles. Businesses are expected to have slowed inventory building in the final three months of the year. For that reason, many economists believe overall economic growth has decelerated to a 2 percent annual rate.
But some economists said the smaller trade deficit in October could mean overall economic growth will be a bit stronger than expected. Paul Ashworth, chief U.S. economist at Capital Economics, said growth in the October-December quarter could be a little higher than 2 percent, based on the October trade improvement.
The rise in exports in October came after three months of declines. Analysts believe exports will keep growing, reflecting modest recoveries in Europe, Japan and China. Stronger global growth has helped drive more activity at U.S. factories.
A closely watched survey of U.S. manufacturing activity rose in November to the highest level in 2 ½ years. And the Institute for Supply Management’s survey showed growth in exports increased at the fastest pace in nearly two years.
In October, U.S. exports to the European Union rose 1.5 percent. The U.S. trade deficit with the European Union hit a monthly record of $14.3 billion in October, reflecting a 21.5 percent jump in exports.
America’s deficit with China narrowed slightly in October to $28.9 billion. U.S. exports to China hit a record at $13.1 billion. But that was a fraction of its imports from China, a record $41.9 billion.
The U.S. trade imbalance with China is the largest for any country. It is up 2.1 percent for the year and on track for another all-time high.
In an October report, the Obama administration said that it still believed China’s currency, the renminbi, was significantly undervalued but it declined to label China a currency manipulator. Such a designation would have triggered negotiations that could ultimately lead to U.S. trade sanctions against China.
American manufacturers have long contended that China is keeping its currency artificially low to make Chinese goods cheaper in the U.S. market and American products more expensive in China