Trade figures boost US economy

12/12/2006

By Eoin Callan in Washington
Financial Times
Published: December 12 2006 15:06 | Last updated: December 12 2006 15:06


The US trade deficit narrowed more than expected in October, the latest figures showed, giving a significant boost to the economy.


Rising exports of business and financial services helped cut the trade deficit to $58.9bn from $64.3bn in September, while the falling price of foreign oil reduced the value of imports.


The evidence of sustained US export growth points to continued economic expansion in the fourth quarter even as domestic demand moderates.


However, the politically sensitive deficit with China continued to widen, rising $1.4bn to $24.4bn in October. This increase puts the deficit with China on track to beat last year’s record of $202bn.


The signs of an increased trade imbalance with China come as a high-level US delegation heads to Beijing for a “strategic economic dialogue”.


The delegation is being led by Hank Paulson, Treasury secretary, and will press Beijing to take steps that ease the record trade gap.


US manufacturers want the delegation – which also includes Federal Reserve Chairman Ben Bernanke – to press Beijing to let China’s currency appreciate.


US manufacturers blame currency manipulation by policymakers in Beijing for fuelling cheap exports by their Chinese competitors.


The delegation is also expected to seek greater access to China’s financial services market for US banks, brokerages and insurance companies.


Meanwhile, the monthly trade figures showed total US exports worldwide rose by $300m to $123.6bn, as exports of corporate services such as banking and insurance increased by $400m to $35.2bn. This helped drive the services surplus to $6.2bn.


The overall goods deficit narrowed to $65.1bn, while the value of all imports fell by $5.1bn to $182.5bn.