Smallest gap this year, but Q3 GDP may be downwardly revised By Greg Robb, MarketWatch WASHINGTON (MarketWatch) — The U.S. trade deficit narrowed for the fourth straight month in October, bringing the trade gap down to its lowest level this year. The nation’s trade deficit narrowed 1.6% in October to $43.5 billion, the Commerce Department said. A prominent feature of the report was a sharp upward revision to September trade gap to $44.2 billion from the initial estimate of $43.1 billion, which could cut the government’s estimate of third quarter growth, now estimated at a 2% annual rate. Analysts surveyed by MarketWatch had expected a deficit of $43.6 billion in October. See MarketWatch economic calendar. Both imports and exports declined in October, with imports falling at a slightly faster rate. Exports fell 0.8% to $179.2 billion in October after hitting a record high in September. Imports fell 1.0% to $222.6 billion. Imports have been treading water after hitting $226.2 billion in May, the highest level in this business cycle. Economists say that U.S. merchants are being cautious about stocking shelves this holiday season. Details According to the report, imports of goods alone fell 1.2% to $186.6 billion in October. The largest drop came from imports of industrial supplies, principally crude oil. Imports of autos also declined. Imports of agricultural products and capital goods were the highest on record in the month. Meanwhile, exports of goods alone slipped 1.2% to $127.8 billion. However, the United States exported a record amount of capital goods and petroleum in the month. Exports of civilian aircraft also increased in October. The petroleum deficit narrowed 8.4% in October to $24.4 billion. This is the lowest level since last December. The value of U.S. crude oil imports fell to $26.0 billion in October from $28.3 billion in September as the price of a barrel of oil fell to $98.84 from $101.02 in the previous month. The average price per barrel of crude oil has fallen for five straight months. China, Japan and euro area Despite the improvement in the overall trade gap, the U.S. trade deficit with China widened to $28.1 billion in October from $25.7 billion in the same month last year. Imports from China in October were the highest on record. Ahead of next fall’s presidential election, the White House and Congress are both increasing pressure on China to allow its currency to strengthen. Even top Federal Reserve officials are asking China to do more to increase its imports. The data for October show that trade with Japan has recovered from last March’s earthquake and subsequent tsunami. Imports from Japan in October were the highest since April 2008 while exports to Japan were the highest since March 1997. Economists are growing concerned that an expected recession in Europe as a result of the sovereign-debt crisis may dampen U.S. exports to the region. But so far there is little sign of weakness. U.S. exports to the euro area totaled $17.4 billion in October, up from $16.2 billion in the same month last year. Greg Robb is a senior reporter for MarketWatch in Washington.

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