Fourth quarter GDP growth looking better than expected
12/14/2010 12:13 pm EST
U.S. exports rose 3.2% in October to $159 billion, according to data released on Friday, December 10. That’s the highest level since the middle of 2008.
With a dip in imports, down 0.5% in October, to $197 billion, the U.S. trade deficit shrank for the month to $39 billion. That’s a drop of 13% for the month and brings the deficit to its lowest level since January.
The lower level of imports suggests higher GDP growth for the fourth quarter. In the third quarter surging imports lopped 1.8 percentage points off the 2.5% GDP growth figure for the quarter. (Roughly, higher imports mean that a given level of economic activity doesn’t produce as much in the way of domestic economic growth,)
Economists estimate that the higher level of exports, and lower level of imports, and improved domestic economic activity in such areas of the economy as the retail sector could lead to GDP growth of 3% or better in the fourth quarter. That would provide a solid foundation for recently rising stock prices.
Much of the improvement in exports (and much of the decline in imports) comes from a falling U.S. dollar, which makes U.S. export goods cheaper to overseas consumers and imports more expensive for U.S. consumers. And the improving U.S. economic picture continues to take a toll on the price of U.S. Treasuries. For the week yields on 10-year Treasuries—and remember yields go up as prices of the bonds go down—rose to close at 3.33%, the highest close for the week.