The U.S. trade deficit narrowed sharply in October as exports soared to a record high, potentially setting up trade to contribute to economic growth this quarter for the first time in more than a year.
The report from the Commerce Department on Tuesday, which also showed imports rising to an all-time high, added to a tightening labor market, strong consumer spending as well as services and manufacturing activity that have suggested an acceleration in growth was underway as the year winds down.
Exports of industrial supplies and materials increased $6.4 billion, with shipments of crude oil advancing $1.2 billion.Capital goods exports increased $3.1 billion, boosted by other industrial machines as well as civilian aircraft. Food exports rose by $2.1 billion, with soybeans increasing $1.8 billion. Exports of consumer goods jumped $1.6 billion, lifted by increases in shipments of gem diamonds as well as motor vehicles, parts and engines.
"While international travel activity could be dampened again later in the month with the emergence of the Omicron variant, we expect a continued normalization of travel through 2022," said Veronica Clark, an economist at Citigroup in New York.The surge in exports eclipsed a 0.9% increase in imports to $290.7 billion, also a record high. Goods imports climbed 0.7% to an all-time high of $242.7 billion. The rise was led by motor vehicles, parts and engines, which increased $1.5 billion.
"Early in the fourth quarter it looks like net exports are on track to add to GDP growth although the recent volatility in the monthly figures makes it hard to detect any underlying trend," said Daniel Silver, an economist at JPMorgan in New York. "We continue to see upside risk to our 7.0% real GDP growth forecast for the fourth quarter."
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