Business

US trade deficit narrows unexpectedly

Mexican trucks cross the US border by Sonora, Mexico.
Image caption US trade with Mexico hit record levels in the month

The US trade deficit narrowed sharply in October to a much lower than expected $38.7bn.

Wall Street analysts had expected the deficit to be $43.6bn, only slightly below the revised $44.6bn for October.

The surprise number was due to a 0.5% fall in imports versus the previous month, suggesting spending in the US remains subdued. Exports rose 3.5%.

Separate figures also suggested a better-than-expected rise in US consumer confidence in December.

China exports

Analysts were particularly buoyed by the increase in US exports.

"Renewed export growth is especially welcome given the slow export growth seen throughout 2010, and it has been driven by the weakening of the dollar over the last several months," said Christopher Cornell at Moody's Analytics.

"A sharp increase in US exports to China explains a little less than half of the change, and is all the more notable since there was little change in US imports from China."

Despite the strong performance for the month, the US deficit for 2010 as a whole has risen considerably.

At the current rate, it is on course to reach about $500bn for the year, up from $346bn in 2009.

'Better indicators'

The Thomson Reuters/University of Michigan consumer sentiment index rose to 74.2 in December, up from 71.6 in November. This is the highest rate recorded by the survey since June this year.

"This is an indication of the favourable development we are seeing so far with the year-end holiday season," said Pierre Ellis at Decision Economics.

"It adds to the growing number of economic indicators that are looking better than expected."

Consumer confidence in closely watched in the US, as consumer spending accounts for around 70% of total economic output.

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