WASHINGTON (AP) -- The U.S. trade deficit narrowed sharply in June to its lowest level in more than three and a half years. Exports rose to an all-time high and imports declined, signs that economic growth is stronger than previously thought.
The Commerce Department said Tuesday that the June deficit fell 22.4 percent to $34.2 billion. That's the lowest since October 2009 and down from May's imbalance of $44.1 billion, which was revised lower.
Exports rose 2.2 percent to $191.2 billion in June. U.S. companies shipped more aircraft engines, telecommunications equipment, heavy machinery and farm goods.
Imports dropped 2.5 percent to $225.4 billion. Oil imports declined to the lowest level in more than two years.
The lower deficit could lead the government to revise economic growth for the April-June quarter higher.
Last week, the government said the economy grew at an annual rate of 1.7 percent in the second quarter, in part because trade cut nearly a full percentage point from growth. But the government estimated the June trade figures when calculating its first read on economic growth. The government will offer a more complete estimate for second-quarter growth on Aug. 29 that will include June's more promising trade report.
A smaller trade deficit lifts growth because it means consumers and businesses are spending less on foreign goods than companies are taking in from overseas sales.
Many economists think overall economic growth has started to rebound in the July-September quarter. Some say growth could near a 3 percent annual rate. A key reason is that several export markets, including Europe, are seeing improvement.
For June, U.S. exports to the 27-nation European Union rose 1.5 percent. That helped shrink the deficit with the region to $7.1 billion.
The deficit with China fell 4.3 percent to $26.6 billion. Through the first six months of this year, the imbalance with China is running 1.9 percent above the same period a year ago.
America's deficit with Japan rose 2.2 percent to $5.5 billion in June. The imbalance with Canada dropped 13.7 percent to $1.6 billion. The deficit with Mexico fell 9.6 percent to $4.8 billion in June.
U.S. factories are already starting to show more strength after slumping earlier this year, helped by increases in business spending and less drag from government cuts.
Activity at U.S. factories increased in July at the fastest pace in two years in July, according to the Institute for Supply Management's closely watched manufacturing index.
And U.S. factories added 6,000 jobs in July, the Labor Department said Friday. That was the first month of manufacturing job growth since February.