US trade deficit drops on energy exports

The U.S. trade deficit narrowed in October as exports hit a record high, boosted by the nation's expanding energy sector.

The trade gap fell to $40.6 billion in October, 5.4 percent below the September deficit of $43 billion, the Commerce Department said Wednesday. 

September's deficit was wider than the $41.8 billion initially reported.

The gap narrowed on petroleum exports, which hit an all-time high in October.

Exports were up 1.8 percent to a record $192.7 billion, bolstered by a 9.3 percent jump in petroleum exports.

There were increasing signs that the global economy is improving with record-level exports heading to China, Canada and Mexico.

Imports increased 0.4 percent to $233.3 billion, which is the highest since March 2012.

The deficit is expected to come in below last year's levels and, at this point, is about 11 percent lower. 

New economic expansion figures are due out on Thursday and economists expect that the third quarter numbers will eclipse 3 percent, up from 2.8 percent in the initial estimate. 

Still, slower growth is expected for the final three months of the year and, overall, economists are expecting that the economy's expansion will fall below 2 percent for the year. 

Meanwhile, the U.S. trade deficit with China narrowed slightly to $28.9 billion as exports hit a record $13.1 billion.

But that is still far from balancing out with the imports from China, which totaled their own record of $41.9 billion. 

At this pace, the deficit with China will probably hit another record this year. 

Manufacturers and lawmakers complain that China gains a global trade advantage by undervaluing its currency.

But the Treasury Department has yet to deem the world's second-largest economy a currency manipulator over concerns about retaliation.

U.S. officials remain engaged in urging China to move toward a more market-based currency.

Treasury Secretary Jack Lew visited China last month to discuss currency and trade issues.

Vice President Biden, who is in Beijing on Wednesday for high-level meetings, has been forced to shift his focus toward security issues and away from economic ties.