WASHINGTON, Dec. 18 (UPI) -- The Commerce Department said Wednesday the nation's trade deficit during October narrowed to its lowest level in seven months to a seasonally adjusted $35.1 billion from a revised $37.1 billion shortfall in September.
Economists on Wall Street were expecting the trade gap to narrow to $36.6 billion during the month from the government's originally reported September gap of $38 billion.
The international trade measures the difference between imports and exports of both tangible goods and services. The level of the international trade balance, as well as changes in exports and imports, indicate trends in foreign trade.
Changes in the level of imports and exports, along with the difference between the two (the trade balance) are a valuable gauge of economic trends here and abroad. Furthermore, the data can directly affect financial markets, especially the foreign exchange value of the dollar.
Imports indicate demand for foreign goods and services in the United States. Exports show the demand for U.S. goods in overseas countries. The dollar can be particularly sensitive to changes in the chronic trade deficit run by the United States, since this trade imbalance creates greater demand for foreign currencies. The bond market is also sensitive to the risk of importing inflation.
This report gives a breakdown of U.S. trade with major countries as well, so it can be instructive for investors who are interested in diversifying globally. For example, a trend of accelerating exports to a particular country might signal economic strength and investment opportunities in that country.
Economists watch for the report not only to gauge U.S.- and overseas-demand but also to calculate gross domestic product. Imports are subtracted from economic growth, because they presumably replace U.S.-produced goods, while exports add to growth estimates.
The latest report from the Commerce Department showed imports of capital goods declined 2.4 percent during the month to $22.1 billion, the lowest since August 1998, from $23.6 billion. Imports of computer accessories, telecommunications equipment and semiconductors declined in October.
All imports fell to $117 billion during the month while imports of consumer goods dropped 4.9 percent to $25 billion from $26.3 billion in October.
The value of crude oil imports rose 18.2 percent to $8 billion in October, reflecting higher prices and increased volume. A barrel of crude oil sold for an average $26.17, the highest since December 2000, compared with a September price of $25.47.
Exports fell 1 percent to $82 billion from $82.8 billion in September. The drop was due to fewer exports of capital goods and autos. Exports of commercial aircraft rose 4 percent.
The government agency said by region the trade deficit with Japan rose to $6.5 billion in October from $5.9 billion in September. The shortfall with China narrowed to $9.5 billion from $10.3 billion.
The deficit with the Organization of Petroleum Exporting Countries widened to $3.6 billion from $2.9 billion while the trade deficit with Asia's newly industrialized countries fell to $1.8 billion from $2.1 billion.
The deficit with Canada, the largest U.S. trading partner, narrowed to $4.3 billion from $4.6 billion while the gap with Mexico widened to $3.5 billion from $3 billion.
