The US 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 today that the June deficit fell 22.4% to $34.2 billion. That is the lowest since October 2009 and down from May's imbalance of $44.1 billion, which was revised lower.

Exports rose 2.2% to $191.2 billion in June as US companies shipped more aircraft engines, telecommunications equipment, heavy machinery and farm goods.

Imports dropped 2.5% to $225.4 billion with oil imports declining to the lowest level in more than two years.

The lower deficit could lead the government to revise economic growth for the second quarter higher. Last week, the government said the economy grew at an annual rate of 1.7% in the second quarter, in part because trade cut nearly a full percentage point from growth.

But the government only 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 August 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 in the US has started to rebound in the third quarter. Some say growth could near a 3% annual rate due to the fact that several export markets, including Europe, are seeing improvements.

For June, US exports to the 27-nation European Union rose 1.5%, which helped shrink the deficit with the region to $7.1 billion. The deficit with China fell 4.3%to $26.6 billion. The imbalance with China is running 1.9% for the first six months of the year above the same time a year ago. America's deficit with Japan rose 2.2% to $5.5 billion in June.

US 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 US 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. US factories added 6,000 jobs in July, the Labour Department said on Friday - the first month of manufacturing job growth since February.