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U.S. Trade Deficit Narrows More Than Expected To $42.4 Billion

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With exports rising and imports falling, the Commerce Department released a report on Thursday showing that the U.S. trade deficit narrowed by more than anticipated in the month of August.

The Commerce Department said the trade deficit narrowed to $42.4 billion in August from a revised $43.6 billion in July.

Economists had expected the trade deficit to narrow to $42.7 billion from the $43.7 billion originally reported for the previous month.

The narrower than expected deficit was partly due to an increase in the value of exports, which rose by 0.4 percent to $195.3 billion in August from $194.5 billion in July.

Notable increases in exports of pharmaceutical preparations and telecommunications equipment were partly offset by decreases in exports of fuel oil and foods, feeds, and beverages.

The report also showed a modest decrease in the value of imports, which edged down by 0.1 percent to $237.7 billion in August from $238.1 billion in July.

Imports of industrial supplies and materials, computer accessories and civilian aircraft declined during the month, while imports of passenger cars showed a significant increase.

Andrew Hunter, U.S. economist at Capital Economics said the narrower trade deficit provides further evidence that net trade was on course to make a small positive contribution to third quarter GDP growth.

"Looking ahead, exports should continue to benefit from the recent strength of global growth and, with the boost from the dollar's 7% trade-weighted depreciation this year only starting to feed through, exports should remain strong for the rest of this year," Hunter said.

He added, "The surveys suggest that imports will also start to pick up, but the modest boost to GDP growth from net trade is still likely to continue over the coming quarters."

The Commerce Department said the goods deficit narrowed to $64.4 billion in August from $65.3 billion in July, while the services surplus widened to $22.0 billion from $21.7 billion.

by RTT Staff Writer

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