With exports rising and imports falling, the Commerce Department released a report on Tuesday showing the U.S. trade deficit narrowed significantly in the month of November.
The report said the trade deficit narrowed to $43.1 billion in November from a revised $46.9 billion in October. The trade deficit shrank to its smallest since hitting $42.0 billion in October 2016.
Economists had expected the deficit to narrow to $43.8 billion from the $47.2 billion originally reported for the previous month.
The narrower trade deficit came as the value of exports climbed by 0.7 percent to $208.6 billion in November after edging down by 0.1 percent to $207.3 billion in October.
Exports of drilling and oilfield equipment, civilian aircraft engines, jewelry and automotive vehicles and parts showed notable increases.
Meanwhile, the report said the value of imports slumped by 1.0 percent to $251.7 billion in November after tumbling by 1.7 percent to $258.7 billion in October.
Steep drops in imports of civilian aircraft, computers and cell phones and other household goods more than offset a jump in imports of automotive vehicles and parts.
The Commerce Department noted the narrower trade deficit also came as the goods deficit shrank to $63.9 billion in November from $67.8 billion in October. The services surplus was little changed at $20.8 billion.
Andrew Hunter, Senior U.S. Economist at Capital Economics, said the recent drop in imports can partly be explained by temporary factors but noted the data suggests real imports contracted by close to 10 percent annualized in the fourth quarter, with exports little changed.
“That would see net trade adding almost 2.0%-pts to annualized GDP growth, although that boost looks to have been almost entirely offset by a big drag from inventories,” Hunter said.
“With imports likely to rebound soon, that boost won’t be repeated,” he added. “But the stabilization in global manufacturing activity, and the trade truce with China, suggest that the drag on the U.S. economy from weak growth overseas has now run its course.”