The U.S. trade deficit narrowed to a seven-month low in September as exports rebounded while imports shrank, reflecting the smallest monthly foreign oil costs in more than a decade, the government reported Wednesday, suggesting the economy was strong enough to support an interest-rate increase from the Federal Reserve (Fed) in December. The Commerce Department said the trade deficit in goods and services fell to $40.8 billion in September, down 15 percent from $48 billion the previous month. Imports fell 1.8 percent to $228.7 billion, the lowest level since February. Imports of industrial supplies fell to the lowest level since mid-2009. The big drop in oil prices sent petroleum imports down 8.3 percent to $13.8 billion, the lowest level since mid-2004. The price of petroleum averaged $42.72 a barrel in September, down from $49.33 in August and $92.52 in September 2014. Exports rose 1.6 percent to $187.9 billion in September, with exports of services hitting a record high. Exports of capital goods and automobiles rose, while exports of industrial supplies fell to the lowest level since late 2010. Through September, the U.S. trade deficit is running 3.9 percent above last year, when the deficit for the full year totaled $508.3 billion. Economists expect a bigger deficit this year, reflecting lower exports, which are down 3.8 percent so far this year due to weakness overseas and a stronger dollar, which has gained nearly 17 percent against other major currencies since June 2014. Trade had a neutral impact on third-quarter gross domestic product (GDP), which expanded at a weak 1.5 percent annual rate. The sharp slowdown from the second quarter's strong 3.9 percent growth mainly reflected a slow pace of inventory accumulation and continuing spending cuts by energy companies. The September report showed the U.S. trade deficit with China rose 3.8 percent to a record high of $36.3 billion as imports reached a record. The U.S. deficit with China is running 8.4 percent higher than a year ago, on track to set another in a series of annual records. The U.S. deficit with China is the largest with any country. U.S. exports to Canada—the biggest U.S. trading partner—the European Union, and China rose in September, but exports to Japan plunged 13.8 percent to their lowest level since early 2010.
