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[WASHINGTON] The US trade deficit increased in October as exports fell amid declining shipments of soybeans and other goods, suggesting that trade would be a drag on growth in the fourth quarter.
The Commerce Department said on Tuesday that the trade gap widened 17.8 per cent to US$42.6 billion. September's trade deficit was revised slightly down to US$36.2 billion.
Economists polled by Reuters had forecast the trade gap increasing to US$41.8 billion in October after a previously reported US$36.4 billion shortfall. When adjusted for inflation, the deficit rose to US$60.3 billion from US$54.2 billion in September.
Exports contributed 0.87 percentage point to the third quarter's annualised 3.2 per cent annualised rate of increase in the gross domestic product. The jump in exports in the last quarter largely reflected a surge in soybean shipments after a poor harvest in Argentina and Brazil.
While the reversal in soybean shipments, which is weighing on exports, suggests that trade is likely to subtract from GDP growth in the fourth quarter, consumer spending and a firming housing market are expected to keep supporting the economy.
Rising gas and oil well drilling in response to increasing oil prices is also expected to boost growth this quarter.
Exports fell 1.8 per cent to US$186.4 billion in October. Exports were held down by declining shipments of food, industrial supplies and materials, automobiles and consumer goods. Exports of soybeans, which helped power the economy in the third quarter, fell in September.
However, exports of capital goods were the highest since Dec 2015. Some of the drag on exports reflects the residual effects of the US dollar's surge against the currencies of the United States' main trading partners between June 2014 and Jan 2016.
With the US dollar resuming its rally in the wake of Donald Trump's victory in the Nov 8 presidential election, exports could struggle in early 2017.
In October, exports to the European Union fell 1.1 per cent, with goods shipped to the United Kingdom tumbling 12.2 per cent. But exports to China surged 32.8 per cent to their highest level since Dec 2013.
Imports of goods and services increased 1.3 per cent to US$229.0 billion in October, the highest level since Aug 2015. Imports of petroleum goods were the highest in a year, reflecting an increase in crude oil prices.
Imports from China rose 4.2 per cent to their highest level in a year. The politically sensitive US-China trade deficit fell 4.2 per cent to US$31.1 billion in October.