The September U.S. foreign trade deficit fell to $56.5B, the smallest since May 2005. The deficit for August was revised shallower from the initial report and the latest figure was a surprise to Consensus expectations for a deeper deficit of $58.5B.

The deficit averaged $58.6B during the first nine months of this year compared to an average of $64.6B during the first nine months of 2006.

U.S. exports jumped 1.1% after the small 0.7% rise in August which was revised up slightly.

Exports of goods recovered 1.3% (14.1% y/y) after just a 0.4% up tick in August. Exports of nonauto consumer goods led the gain with a 2.6% surge (18.4% y/y). Exports of foods, feeds & beverages also jumped 9.4% (42.4% y/y) after a 7.9% August surge.Exports of autos & products rose 0.7% (18.5% y/y). Exports of capital goods fell 1.0% ( +7.8% y/y), for the second consecutive month of decline, led by a 7.5% drop in exports of civilian aircraft (+8.1% y/y. Exports of advanced technology goods also fell by 1.5% (+3.9% y/y).

U.S. exports of services rose 0.7% (12.5% y/y) after an upwardly revised 1.4% August gain.

Overall imports rose 0.6% though imports of petroleum products fell 0.2% (+4.6% y/y) after a very much downwardly revised gain of 0.1% during August. Imports of nonauto consumer goods rose 0.5% (4.0% y/y) and capital goods imports jumped 2.0% (6.8% y/y). Imports of advanced technology products increased 0.4% (7.1% y/y).

The U.S. trade deficit in goods with China deteriorated m/m to $23.8B versus a deficit of $22.9B during September of '06. During the first nine months of this year the deficit with China averaged $20.8B versus $18.5B in 2006. Exports rose 16.6% and imports rose 13.5%.

International Trade: Why We Don’t Have More of It from the Federal Reserve Bank of Philadelphia is available here.

Is the United States Losing Its Productivity Advantage? from the Federal Reserve Bank of New York can be found here.