The trade deficit narrowed in October to the lowest level of the year, reflecting a drop in imports that will help give the U.S. economy a lift.
The gap shrank 1.6 percent to $43.5 billion, smaller than projected, from $44.2 billion in September, Commerce Department figures showed today in Washington. Purchases from overseas fell to the lowest level since April, due almost entirely to a plunge in demand for petroleum.
Imports of capital goods, like computers and aircraft, and consumer goods climbed, showing spending by American companies and households is keeping the economy growing. Exports to China and South and Central America reached records, indicating demand from developing nations that is benefiting companies like Dow Chemical Co. (DOW) may cushion the U.S. from any slowdown in Europe.
The below chart outlines the 12-month change in real net exports by category (as well as the breakdown between the change in real imports and exports). As can be seen, the trade deficit is improving, due to improved industrial supplies and consumer goods trade balances.