Trade deficit shrinks 10.8 to 70.4 billion in August
Exports increase 2.0 to record high; imports fall 0.9

WASHINGTON, Oct 8 Reuters The U.S. trade deficit narrowed sharply in August as exports increased to a record high, suggesting trade could have little or no impact on economic growth in the third quarter.

The smallerthanexpected trade gap reported by the Commerce Department on Tuesday added to data on the labor market and consumer spending in suggesting that the economy remained on solid footing last quarter.

The economy39;s strength likely has no impact on expectations that the Federal Reserve will cut interest rates again next month. It, however, reinforced views that the U.S. central bank did not need to pursue another halfpercentage point rate reduction. Economists at Goldman Sachs maintained their forecast for gross domestic product to rise at a 3.2 annualized rate in the JulySeptember quarter after the trade data.

This report says that net trade supports GDP growth in August, said Carl Weinberg, chief economist at High Frequency Economics. Putting together July and August figures suggests that net trade is flat so far in third quarter, making no significant addition or subtraction to GDP growth so far. The trade gap contracted 10.8 to 70.4 billion, the smallest in five months, from a revised 78.9 billion in July, the Commerce Department39;s Bureau of Economic Analysis said.

Economists polled by Reuters had forecast the trade deficit would narrow to 70.6…