Trade Deficit Shrinks as Exports Hit Record

The U.S. trade deficit narrowed sharply in September, aided by a slide in the value of the dollar that helped push exports to record levels, a government report showed Wednesday.

The monthly trade gap totaled $51.6 billion, down from a revised $53.5 billion in August, the Commerce Department said. Economists had forecast the September trade deficit would come in at $53.5 billion, only slightly lower than the original estimate for August of $54 billion.

The narrower-than-expected shortfall brightened expectations of third-quarter U.S. economic growth.

“It is pretty encouraging news and says that we will probably get an upward revision to third-quarter” gross domestic product,” said David Resler, chief economist at Nomura Securities International in New York.

But it did little to ease worries about the overall trade deficit, which is on track to exceed $500 billion this year.

The dollar slid to record lows against the euro after the report as traders focused on long-term fundamentals, which suggested the greenback had further to fall.

“I don’t see enough details in the report that would suggest to me that it’s a structural shift in trade deficit,” said Anthony Chan, managing director and senior economist with J.P. Morgan Fleming Asset Management in Columbus, Ohio.

Sung Won Sohn, chief economist at Wells Fargo in Minneapolis, agreed that record oil prices could continue to push the trade deficit higher in coming months.

But he was more optimistic that the September report heralded a long-term improvement in the trade gap.

“If you look at the underlying trend in deficits, hopefully the worst is over,” Sohn said.

The rise in exports to a record $97.5 billion and the slight drop in imports to $149 billion show the effects of the weaker dollar and the slowdown in economic activity earlier this year, he said.

The September trade gap reflected record average oil prices of $37.62 a barrel, up more than 40% from the same month last year, the Commerce Department said.

U.S. exports of consumer goods and industrial supplies and materials set records in September, while exports of autos and auto parts were second only to the record set in August.

But in a sign that global trade imbalances remain far from resolved, the politically sensitive gap with China set another record, at $15.5 billion, as imports from the Asian manufacturing powerhouse rose to a record $18.4 billion.