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The US trade deficit widened in October as exports suffered the biggest drop in nearly four years, i

Weak US exports, imports signal tepid economic growth

The US trade deficit widened in October as exports suffered the biggest drop in nearly four years, indicating slowing global demand was spilling over into the already struggling US economy.

The Commerce Department said yesterday the trade gap increased 4.9% to $42.2bn. In a sign of weak domestic demand, imports dropped to the lowest level in 1-1/2 years. Economists had expected the trade deficit to rise to $42.6bn in October.

The wider trade gap in October reflected a 3.6% fall in exports of goods and services to $180.5bn. That was the biggest% drop in exports since January 2009.

“The report tells a tale of weakening economic growth momentum both domestically and globally,” said Millan Mulraine, a senior economist at TD Securities in New York.

Exports have been one of the pillars supporting the economy since the 2007-09 recession ended. The pull back was telegraphed by weak manufacturing surveys and reflects slowing global demand.

Imports of goods and services fell 2.1% to $222.8bn in October, the lowest since April 2011.

Trade was a modest boost to the third quarter’s 2.7% annual growth pace. Revisions to September’s data showed a narrower trade gap than previously reported and suggest the contribution from trade was probably slightly bigger.

Though October’s trade data implied trade would make another small contribution to GDP in the fourth quarter, economists said the size of the drop in exports raised the bar high for that. In addition, a strike by West Coast dock workers in November likely reduced imports and exports during the month.

The three-month moving average of the trade deficit, which irons out month-to-to month volatility, widened modestly to $41.7bn from $41.5bn in the three months to September.

“If the trade flows over the last three months are to be taken as legitimate economic indicators, they point to contracting global trade flows,” said John Ryding, chief economist at RDQ Economics in New York. “If global trade is contracting, this is a negative growth signal.”

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