U.S. Growth Picture Brightens as Exports Hit Record

Energy Boom Helps Narrow Trade Gap

WASHINGTON—A booming U.S. energy sector and rising overseas demand brightened the nation’s trade picture in November, sharply boosting estimates for economic growth in late 2013 and raising hopes for a stronger expansion this year.

U.S. exports rose to their highest level on record in November, a seasonally adjusted $194.86 billion, the Commerce Department said Tuesday. A drop in imports narrowed the trade gap to $34.25 billion, the smallest since late 2009.

The export gain “is an encouraging sign that the global economy is recovering along with the U.S.,” said Michael Soni, economist at BBVA Compass.

Domestically, the economy has been showing improvement beyond the trade situation. Companies have been hiring at a steady pace across a wide range of industries amid stronger consumer spending, builders trying to satisfy demand for new homes and rising manufacturing output.

Oakworks Inc., a maker of medical, massage and spa tables in New Freedom, Pa., added a second shift in the fall to meet rising demand, said Joe D’Antonio, vice president for international sales.

“That’s related to the fact that demand is increasing, and a good deal of that is from international markets,” he said, citing sales to India, China, Brazil, South Korea and elsewhere.

Oakworks, which has about 125 employees, saw its exports increase about 10% last year and is targeting a 20% to 25% gain for 2014. The company’s tables—a spa table can cost around $5,000 and a high-end medical table as much as $27,000—face competition from less-expensive products made overseas. But many buyers now appear willing to shell out more for higher-quality, higher-priced goods.

“Clearly that is a function of the economy getting better,” Mr. D’Antonio said. “And as a result people have a little more money to spend, to invest in quality. In the past if they didn’t have that money, quality might not be at the top of their list.”

The trade figures led many economists to sharply raise their forecasts for economic growth in the final quarter. Morgan StanleyMS -0.32% economists raised their estimate to an annualized 3.3% from an earlier forecast of a 2.4% pace. Macroeconomic Advisers boosted its fourth-quarter projection to a 3.5% rate from 2.6%.

Fourth-quarter growth at that pace, following a 4.1% annualized increase in the third quarter, would mark the fastest half-year growth stretch since the fourth quarter of 2011 and the first quarter of 2012.

The falling U.S. trade deficit in large part reflects rising domestic energy production. U.S. crude output has increased about 64% from five years ago, according to the U.S. Energy Information Administration. Drillers have unlocked vast amounts of oil from dense layers of rock, notably shale in Texas and North Dakota, giving refiners a closer, cheaper supply of crude.

At the same time, the U.S.’s thirst for petroleum fuels has stalled as vehicles become more efficient. As a result, refiners are shipping increasing quantities of diesel, gasoline and jet fuel to Europe and Latin America.

“Not only is the American energy boom underpinning export growth, it is reducing American demand for foreign oil,” said Jay Bryson, global economist at Wells Fargo.WFC -0.04%

Petroleum exports, not adjusted for inflation, rose to the highest level on record in November while imports fell to the lowest level since November 2010.

If recent trade trends continue, Mr. Bryson said net exports could add one percentage point to the pace of GDP growth in the fourth quarter. That would be the biggest contribution since the final quarter of 2010.

Rising domestic energy production also helps in other ways, by creating jobs, keeping a lid on gasoline costs and lowering production costs for energy-intensive firms. As a result, consumers have more to spend elsewhere and businesses are more competitive internationally.

But it isn’t yet clear that the momentum is sustainable. Economic growth has been choppy since the recession ended in June 2009, with consumers and businesses often jittery.

Some economists already are warning about runaway expectations. “I think 2014 will be better than 2013,” said Michael Moran, chief economist at Daiwa Capital Markets America. “But my view is we are not ready to break out into vigorous growth.”

One impediment has been weakness in Europe, Japan and some emerging markets, which had held back U.S. exporters during different parts of the recovery. Net exports made big contributions to the economy in 2008 and 2009, but more recently have made only modest additions or been a small drag on growth.

Still, the global economy has shown signs of stabilizing in recent months, leading to more orders for American petroleum and other industrial supplies, capital goods and autos.

U.S. exports are up 5.2% from a year earlier, led by rising sales to China, Mexico and Canada. U.S. exports to China from January through November rose 8.7% compared with the same period a year earlier. Exports to Canada, the nation’s largest trading partner, were up 2.5% in the same period.

Some companies have used overseas sales to offset a weak U.S. market for their products. “For the last two years, international sales have been good,” said Anthony Sexton, director of international sales at Kanawha Scales & Systems. “Not so much domestic.”

The Charleston, W.Va., manufacturer makes machinery to weigh and load commodities like coal, iron ore and potash onto railcars and trucks. Each system typically costs between $2 million and $8 million.

Last year was a tough one for U.S. coal production. But Kanawha’s international sales rose about 8% to 10%, with Colombia, Canada and India all big markets. “Kanawha has been exporting since the mid-1980s…to diversify, so we don’t live and die on the U.S. coal market,” Mr. Sexton said.

—Daniel Gilbert and Ben Lefebvre contributed to this article.

Write to Jeffrey Sparshott at jeffrey.sparshott@wsj.com


About Alexander Gordin
An international merchant banking professional with over twenty years of business operating and advisory experience in the areas of export finance, international project finance, risk mitigation and cross-border business development. Clients include foreign governments, municipalities and state enterprises as well as Fortune 500 and small/medium enterprises. Strong entrepreneurial instincts, combined with leadership and strategic skills. Transactional and negotiations experience in over thirty five countries. Author of the highly acclaimed "Fluent in Foreign Business" book and creator of the "Fluent in OPIC", "Fluent in EXIM","Fluent In Foreign Franchising", "Fluent in FCPA",and "Fluent in USTDA" seminar/webinar series. Currently developing "Fluent In ......" seminars and publications. Co-author of the Fi3 Country Business Appeal Indices. Extensive international business development and project finance transaction experience in healthcare, aerospace, ICT, conventional and alternative energy infrastructure, distribution and hospitality industries. Experience managing international public and private corporations. Co-Founded three companies abroad. Strong Emerging and Frontier Market expertise. Published and featured in numerous publications including: The Wall Street Journal, Knowledge@Wharton, NBC.com, The Chicago Tribune, Industry Week, Industry Today, Business Finance, Wharton Magazine Blog, NY Enterprise Report, Success magazine, Kyiv Post and on a number of radio and television programs including: Voice of America, CNBC, CNNfn, and Bloomberg. Frequent speaker on strategy, cross-border finance and international business development. Executive MBA from the Wharton School at the University of Pennsylvania. B.S. in Management of Information Systems from the Polytechnic Institute of NYU. Specialties Strategic Management Advisory, Export Finance, International Project Finance & Risk Management, Cross-border Negotiations, Structured Finance transactions, Senior Government and Corporate officials liason

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