Trade deficit narrows as exports hit two-year high

The U.S. trade deficit narrowed more than expected in October as exports hit a two-year high and the dollar weakened. 

The gap shrank to $38.7 billion down from $44.6 billion in September, a decrease of 13.2 percent and the smallest difference since January, the Commerce Department reported Friday. 

The increase in imports is good news for the Obama administration, which is pushing to double exports in five years as part of a plan to increase economic growth and cut into high levels of unemployment. 

Exports in October were $4.9 billion higher than revised September exports of $153.8 billion, an increase of 3.2 percent, the highest level since August 2008. Exports were driven by sales machinery, food and automobiles.

October imports were $0.9 billion less, or 0.5 percent, than September imports of $198.4 billion. 

The dollar's value against those of its major trading partners has fallen 6.6 percent since hitting a one-year high in early June, making U.S. goods cheaper in other countries. 

The trade deficit with China, a politically charged issue, fell 8.3 percent to $25.5 billion in October, but it's still running 20.3 percent above 2009 levels and will likely match the high set in 2008. 

In 2010, the trade deficit is running at an annual rate of $504.8 billion, up 34.6 percent from the 2009 imbalance of $374.9 billion.

The deficit with Canada, the U.S.'s biggest trading partner, increased 19.6 percent to $1.1 billion. The deficit with the European Union was up 17.4 percent to $7.1 billion, and up 12.5 percent to $5.7 billion with Japan.