Trade Deficit Narrowing!

The trade deficit narrowed in October, suggesting that an export-powered U.S. economy could expand at a faster pace in the fourth quarter. The trade gap fell to $32.9 billion as exports rose 2.6% -- the sixth straight monthly gain -- with trade activity continuing to recover from deep declines seen during the financial crisis.

Imports rose 0.4%, partly reflecting lower oil imports.

"U.S. exports appear to be improving much faster than the domestic economy, suggesting that much of the improvement seen in the manufacturing sector reflects strengthening economic conditions abroad and the impact of the weaker dollar," said Nomura Securities economist David Resler.

Stronger-than-expected net exports lifted growth prospects for the current quarter. The forecasting firm Macroeconomic Advisers raised its estimate for fourth-quarter growth to 3.8% from 3.4%.

“A narrowing of something as fundamental as the trade deficit is indeed good news. It seems too much to hope for, but with a little luck, and restraint among US consumers, it will continue to close”, relates Vincent P. Emmer.

Exports appeared to have hit their bottom during the spring, but they remain 8.6% below their level of a year ago and substantially below their peak in the summer of 2008. The weak dollar and a rebound in global demand are boosting U.S. exporters' activity, offering some hope amid lackluster demand at home.

For instance, U.S. coal companies that export metallurgical coal used in steelmaking are seeing an upswing in interest from European buyers, as China's appetite for coal is eating into more of the world's coal supplies.

Alpha Natural Resources Inc. of Abingdon, Va., expects its exports of such coal to Eastern and Western Europe to rise to between 10 million tons and 12 million tons next year from seven million tons this year.

Other companies said they were seeing more export opportunities. "We continue to see genuine interest primarily into the export market," said Deck Slone, vice president of investor relations at Arch Coal Inc. of St. Louis. "There are indications that deals are getting done in Asia for U.S. metallurgical coal."

In October manufactured-goods exports were 2.8% higher than in September, with capital-goods exports rising 3.7% over the month, according to the National Association of Manufacturers.
"The fact that 21 of the 32 capital goods categories showed growth indicates that the export recovery is broadening," Frank Vargo, a vice president at the trade group, said in a statement Thursday.