WASHINGTON - THE United States trade gap shrank in August on record exports and claims for jobless benefits fell last week, according to government data on Thursday that showed the economy retaining some vigour despite housing market ills.

Even the hard-hit housing sector showed a hint of improvement with foreclosure filings down 8 per cent last month from a 32-month peak in August, according to RealtyTrac, an online market of foreclosure properties.

But other data was less upbeat.

Import prices rose more than expected in September, boosted by rising petroleum prices, while leading US retailers, hurt by unusually warm weather that cut into demand for apparel, rang up dismally low sales.

Some retailers cut their outlook for the entire third quarter. However, the world's largest, Wal-Mart Stores, raised its profit outlook on improved margins and lower expenses, even though sales offered no upside surprise.

Prices for US government bonds initially fell on the trade deficit and jobless claims data as traders saw less chance of future interest-rate cuts by the Federal Reserve.

However, US Treasury bond prices later rose slightly as US stocks retreated from a sharp rally. -- REUTERS