DECEMBER 11, 2010.

Exports Rebound, Boosting Economy

By SUDEEP REDDY And JUSTIN LAHART

Surging global demand for American soybeans, cars, diesel engines and even artwork and antiques has pushed U.S. exports to a level not seen since before the financial crisis, boosting prospects for domestic economic growth.

A 3.2% surge in exports in October, together with a 0.5% drop in imports, sent the U.S. trade deficit to a nine-month low of $38.7 billion, the Commerce Department said Friday. The export gains were broad-based, reflecting stronger sales abroad in industrial materials, food, autos and a host of other categories.

Exports during the month hit their highest level since August 2008, the month before the financial crisis struck and sent global trade into a tailspin.

"It speaks to the revival in global economic activity," said Joshua Shapiro, chief U.S. economist at consultancy MFR Inc. Stronger U.S. consumer spending in the coming year is expected to boost imports as well, offsetting some of the export gains, but that also reflects improving economic activity, Mr. Shapiro said.

Meanwhile, the University of Michigan's December consumer sentiment index on Friday rose to 74.2 from 71.6 in November. That marked its highest level since June, when U.S. economic growth appeared to be gaining speed before the Greek debt crisis hit global markets.

The survey showed improvement in consumers' assessment of both current conditions and the outlook. Consumer expectations for inflation, meanwhile, edged lower.

Recent improvement in jobless claims and job-openings data also suggest the economy is gathering steam, though still not enough to bring down the 9.8% jobless rate.

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.But the upbeat trade report led some economists to raise their estimates for economic growth in the current quarter. Forecasting firm Macroeconomic Advisers, which has one of the lowest projections for fourth-quarter growth, raised its estimate 0.3 percentage point as a result of the trade data, putting it at 2.7%. Morgan Stanley economists raised their projection to 4.2% from 3.7%.

Nick Gutwein, president of Braun Corp., a Winamac, Ind., maker of wheelchair lifts for minivans and buses, said his business has been growing steadily outside the U.S., with foreign sales now accounting for about 10% of total sales. A weaker dollar "is a big driver," he said, adding that most of the closely held firm's exports go to Western Europe. "There's a catch-up occurring in Europe, as well as in Latin America, with legislation requiring buses to be wheelchair-accessible." Braun's exports are up nearly 17% this year.

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A 3.2% surge in exports in October, together with a 0.5% drop in imports, sent the U.S. trade deficit to a nine-month low of $38.7 billion.
.U.S. trade had been a drag on growth earlier this year, as imports picked up, in part from companies rebuilding inventories in the U.S. Now, U.S. companies appear to be benefiting more from the strong growth abroad, particularly outside the developed economies that have struggled alongside the U.S.

"More and more of our exports have started going to the faster-growing regions in Asia, Latin America and Canada," said Morgan Stanley economist Ted Wieseman. "It highlights that the emerging markets never really had much of a slowdown at all. They've continued to outperform throughout the crisis."

Exports of industrial supplies were particularly strong, rising 8%, driven by chemicals and plastics. Food exports also surged. Among the big gains: Soybean exports jumped to almost $2.4 billion, an all-time high, from $1.8 billion in September.

The fortunes of farmer Brian Greenslit reflect those gains. An increasing share of the soybean and corn crops he grows on his 1,600-acre farm in Franklin, Minn., is now destined for China, where a growing appetite for pork and poultry is raising demand for animal feed. He said he worries that the shift in agricultural demand is hurting established U.S. customers, who must compete with China and are shouldering rising prices as a result.

"The last thing we want to do is cause a problem for our customers that we've had for 100 years," he said. "But China is a customer that has money, and they're coming to the table, and they're not going to quit coming to the table."

A.F. "Tony" Raimondo, chief executive of Behlen Manufacturing Co. in Columbus, Neb., said exports of his company's metal buildings and other equipment would reach $12 million this year, up from $8 million last year.

"The biggest product that we export overseas is grain bins," he said. "We've seen a nice pickup in Eastern Europe and the Middle East."

The increase in global demand is translating into increased hiring: Behlen has added about 30 people to its payrolls in the past four months, bringing its U.S. head count up to 850 employees.

The drop in imports came entirely from a drop in petroleum products coming into the U.S. Imports are expected to strengthen into next year as U.S. consumer spending picks up, amid steady improvement in the economy and a jolt from the payroll-tax cut included in the compromise tax package now before Congress.

While strengthening consumption could benefit overseas producers, countries such as China that make much of the apparel and electronics imported into the U.S. are also seeing inflation surges pushing up their labor costs. That could benefit some domestic producers in the U.S. by making their products more competitive.

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