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Economy boosted by narrowing trade deficit

December 9, 2011 | 10:09 am

The U.S. economy, which has been picking up steam recently, got another boost from the latest trade numbers.

The Commerce Department said Friday that the nation’s trade deficit in October narrowed to $43.5 billion, the lowest level since December 2010.

The improvement, from an upwardly revised deficit of $44.2 billion in September, was due almost entirely to higher exports and lower imports of petroleum, a volatile category.   

Still, the smaller trade shortfall prompted analysts to mark up their projections for gross domestic product, the broadest measure of economic activity.

Macroeconomic Advisers raised its GDP growth forecast for the quarter by two-tenths of a percent, to an annual rate of 3.7%. That’s a significant pickup from 2% most recently estimated for the third quarter. If such an acceleration could be sustained, it would give a big boost to job creation.

But that’s a very big if.

Some analysts expect the U.S. trade deficit to widen again as oil prices have ticked back up. What’s more, there are hints that American exporters are starting to feel the pinch from Europe’s debt troubles and weakening economy.  While shipments of capital goods continued to grow, the rate of increase has slowed. Europe accounts for about one-fifth of all U.S. exports.

Meanwhile, the recent uptick in American consumer spending could lead to gains of imports in the near future.

Despite worries about the Eurozone debt crisis and the slow growth of jobs in the U.S., consumers are clearly feeling better about the  economy. In the latest sign of that, the early December reading of the University of Michigan consumer sentiment index increased to 67.7, from 64.1 in November, according to a report Friday. It marked the fourth straight month of improvement and was slightly better than what many analysts were expecting.

-- Don Lee

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