By Harriet Torry and David Harrison
WASHINGTON--The U.S. trade deficit narrowed in October as U.S. imports of consumer goods continued to fall, the latest sign that slowing global growth might be spilling into the domestic economy.
The foreign-trade gap in goods and services contracted 7.6% from the prior month to a seasonally adjusted $47.20 billion in October, the Commerce Department said Thursday.
Economists surveyed by The Wall Street Journal had expected a trade deficit of $48.5 billion.
The data provided fresh evidence that softening economic growth abroad is spilling across U.S. borders, as the decline in imports was concentrated in sectors that are often indicative of underlying demand in the domestic economy.
Imports decreased 1.7% overall in October, with imports of consumers goods such as cellphones dropping 4.2%, toys falling 10.1% and apparel decreasing 9.2%.
Imports of capital goods such as semiconductors, industrial machines and computers fell to $41.39 billion, a sign of continued weak business investment.
Imports are a drag on gross domestic product, and a narrower U.S. trade deficit is generally a positive sign for economic growth. However lower imports of consumer goods could point to waning consumer demand, a negative signal since household spending is core to U.S. growth.
Exports, meanwhile, fell 0.2% to $207.1 billion from September's $207.6 billion. Exports of vehicles, civilian aircraft engines and consumer goods all declined in October - a negative sign for American manufacturers.
Trade has been a drag on growth for the past two quarters, according to the Commerce Department's most recent reading of gross domestic product. Net exports subtracted 0.11 percentage point from the third quarter's 2.1% GDP growth rate, compared with a 0.68 percentage point drag in the second quarter.
The unresolved trade dispute with China has added extra volatility to the trade picture. The U.S. on Sept. 1 imposed new tariffs on about $111 billion in products, including for the first time some consumer goods imported from China. Another round of tariffs set to take effect Dec. 15 would cover consumer goods extensively, including smartphones, toys and apparel.
"It continues to be a volatile environment there because the uncertainty just continues and the talks go on," Emanuel Chirico, chief executive of apparel company PVH Corp., said during an earnings call last week. "It's very hard to plan," he added.
Through the first ten months of 2019, the U.S. trade deficit grew 1.3%.
Thursday's report for the trade deficit in October predates recent key developments in U.S. trade policy. On Monday, President Trump said he would raise tariffs on steel and aluminum imports from Brazil and Argentina, surprising financial markets and opening a new front in the global trade war. On Tuesday, he suggested a trade war with China could continue well into next year as he threatened new tariffs on several more countries.
Figures on international trade can be volatile from month to month. In 2019 so far, the goods and services deficit increased 1.3% from the prior year.
In the trade report for October, the U.S. deficit in goods with China narrowed to a seasonally adjusted $27.79 billion. Year to date, the goods deficit with China stands at $294.19 billion compared with $344.94 billion in the same period of 2018.
Many executives say they are hoping business would pick up if a "phase one" trade deal with Beijing to ease tariffs on Chinese imports is agreed in the coming months, along with the approval of the U.S.-Mexico-Canada Agreement, or USMCA.
Frank Sonzala, chief executive of South Gate, Calif.-based chassis trailer manufacturer CIMC Intermodal Equipment, said production has been held back by an overall slowdown in the trucking and intermodal industry in the third quarter, mostly caused by a jump in tariffs on Chinese products to 25% in August. That "made the CFOs, the VPs of finance, and board of directors at many of the companies in the intermodal and trucking industry say we can't afford to pay for five [chassis] and only get four."
The company, the U.S. arm of shipping equipment supplier China International Marine Containers Group Ltd., cut 62% of its employees earlier this year due to the slowdown, bringing its total staff to 140 in California and Virginia.
"You can only paint so many walls, scrub so many floors, and then you have to let people go home," he said. The company won't have a holiday party this year and is cutting other costs and employee perks to try and keep the company afloat, according to Mr. Sonzala.
(END) Dow Jones Newswires
December 05, 2019 08:45 ET (13:45 GMT)Copyright (c) 2019 Dow Jones & Company, Inc.