The US trade deficit with the rest of the world dropped unexpectedly in October, by 7.6 per cent, as a surge in exports offset a small increase in imports, official data showed yesterday.

The goods and services trade gap totalled a seasonally adjusted US$32.9 billion down from a revised US$35.7 billion in September, the Commerce Department said.

Most analysts had forecast the deficit would rise to US$36.8 billion.

The politically sensitive trade deficit with China continued to widen to US$22.7 billion, its highest level in a year.

The gap with China accounts for more than two-thirds of the US trade deficit.

On an annual basis, the overall deficit narrowed 8.1 per cent in October.

Exports increased 2.6 per cent to US$136.84 billion.

Imports rose 0.4 per cent from September, to US$169.78 billion, the highest level since December 2008.

Imports of petroleum products tumbled 10 per cent by volume, as the price of crude oil slipped slightly to US$67.39 a barrel.

The deficit in petroleum products stood at US$17.8 billion, down 13.1 per cent from the prior month September but still represented more than half of the US trade gap.

With Canada, the nation’s leading trade partner, the deficit rose to US$2.0 billon as imports surged to a year-ago high.

The gap with Japan increased slightly to US$4.4 billion from US$4.1 billion, while the deficit with the eurozone shrank to US$3.8 billion, from US$4.1 billion.