US trade gap widens as exports of soybeans, other goods fall

WASHINGTON (REUTERS) - The United States trade deficit recorded its biggest increase in more than 1-1/2 years in October as exports of soybeans and other goods dropped, suggesting that trade would be a drag on growth in the fourth quarter.

The Commerce Department said on Tuesday the trade gap widened 17.8 per cent to US$42.6 billion (S$60.6 billion). That was the largest percentage increase since March 2015.

Economists 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 3.2 per cent annualized rate of increase in 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.

Rising gas and oil well drilling in response to increasing oil prices is expected to boost growth this quarter.

The Atlanta Federal Reserve is currently forecasting GDP rising at a 2.9 per cent rate in the fourth quarter.

Some of the drag on exports reflects the residual effects of the dollar's surge against the currencies of the United States'main trading partners between June 2014 and January 2016. With the dollar resuming its rally in the wake of Donald Trump's victory in the Nov. 8 presidential election, exports could struggle in early 2017.

Imports of goods and services increased 1.3 per cent to US$229.0 billion in October, the highest level since August 2015. There were increases in food, capital goods and consumer imports. But imports of automobiles and industrial supplies and materials fell.

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. With exports outpacing imports, the politically sensitive U.S.-China trade deficit fell 4.2 per cent to US$31.1 billion in October.

In a separate report on Tuesday, the Labor Department said nonfarm productivity, which measures hourly output per worker, rose at an unrevised 3.1 per cent rate in the third quarter.

While the increase snapped three straight quarters of decline, the trend in productivity remains weak. Productivity was unchanged compared to the third quarter of 2015.