The U.S. trade deficit fell in September to the lowest point this year as foreign sales of American-made autos, airplanes and heavy machinery pushed exports to an all-time high.
The deficit narrowed 4 percent to $43.1 billion, the third straight decline and the smallest imbalance since last December, the Commerce Department reported Thursday.
Exports increased 1.4 percent to a record $180.4 billion, reflecting a big increase in shipments of U.S. made autos and auto parts. Imports were up a smaller 0.4 percent to $223.5 billion as oil imports slowed after huge gains earlier in the year.
Through September, the deficit is running at an annual rate of $558.2 billion, up 11.6 percent from the imbalance for all of last year of $500 billion.
A higher deficit acts as a drag on economic growth because it means fewer jobs for American workers. However, with the deficit falling for the last three months, that could provide a small boost to growth in the July-September quarter.
Paul Dales, senior U.S. economist at Capital Economics, said the improvement in the September trade deficit should mean that the estimate of economic growth in the July-September quarter will be revised higher. He said that the current 2.5 percent growth estimate could be boosted to as much as 2.8 percent when the government revises the figure in two weeks.
However, Dale said he was not looking for trade to add much to economic growth in coming quarters with modest gains in exports being offset by rising imports.
The deficit with China narrowed slightly to $28.1 billion September after setting an all-time high at $29 billion in August. Even with the 3.1 percent drop, the September deficit was still the third highest on record. The deficit with China so far this year is still on track to set a record as the highest imbalance the United States has ever recorded with a single country, surpassing last year's record.
The deficit with Japan narrowed 22.7 percent to $5.2 billion as exports from that country dropped by 12.1 percent. Economists had been predicting that exports from Japan would rise in September as auto plants and other Japanese factories got back to more normal production levels following the March natural disasters.
Imports of oil edged up 0.3 percent to $36.4 billion, reflecting a higher volume of shipments. The average price for a barrel of imported crude oil dropped to $101.02 in September, the fourth consecutive monthly decline. But oil prices were still well above where they were a year ago when a barrel of crude averaged $72.33.
Congress last month approved free trade agreements with South Korea, Colombia and Panama. That ended a four-year impasse in approving new trade deals. The administration says the three deals will boost U.S. exports by $13 billion a year.
The administration contends that agreement with South Korea will support 70,000 American jobs and could increase exports by $10 billion. that would be enough to eliminate the current $10 billion trade deficit the United States has with South Korea. The trade pact will make 95 percent of American consumer and industrial goods sold in South Korea duty free within five years.
Labor unions and others opposed the deals. They said the trade pacts will end up costing American jobs because companies will move more jobs overseas. The rising U.S. trade deficit has fueled growing voter unhappiness, largely because unemployment has been stuck near 9 percent for more than two years since the recession ended.
A lot of the political anger is focused on China, given that unemployment remains high in this country and critics contend that unfair Chinese trade practices are costing American jobs.
In October, the Senate approved legislation that would allow the administration to impose penalty tariffs on Chinese products sold in the United States if China does not do more to allow its currency to rise in value against the dollar. The bill faces an uncertain fate in the House.
U.S. manufacturers argue that China is keeping its currency artificially low against the dollar to make Chinese goods cheaper in the United States and American products more expensive in China.