October Trade Gap Narrows

The U.S. trade deficit improved dramatically in October, narrowing to $7.03 billion as American exports climbed to an all-time high, the government said Thursday.

The Commerce Department said the October deficit, the lowest since June, was 18% below September’s deficit of $8.57 billion and reflected the fact that imports declined slightly while exports rose by $1.5 billion.

More than half of the export improvement came in just two categories, civilian aircraft, which rose by $526.6 million, and telecommunications equipment, which was up $329.2 million.

Analysts were surprised by the size of the deficit decline. Many had been forecasting that the trade gap would remain stuck around $8 billion in October.

However, analysts said the October improvement does not change their long-range forecasts that the U.S. trade deficit is headed higher as an improving American economy sucks in more imports and export sales falter in the face of spreading weakness in big overseas markets such as Europe and Japan.

“The long-run trend in trade is still adverse,” said David Wyss, an economist at DRI-McGraw Hill in Lexington, Mass. “Our demand for foreign goods is going up faster than their demand for our goods.

In another economic report, the Labor Department said that new claims for unemployment benefits rose in early December for the first time in four weeks. First-time applications for jobless benefits climbed by 22,000 to 347,000 for the week ending Dec. 5.

States reporting the largest increases were California, 27,970; Pennsylvania, 12,892; Tennessee, 7,562; North Carolina, 7,510, and South Carolina, 7,337.