The international trade balance measures the difference between imports and exports of both tangible goods and services. Imports may act as a drag on domestic growth and they may also increase competitive pressures on domestic producers. Exports boost domestic production. Why Investors Care
| Released on 11/9/07 For Sep 2007 | ||||||||||||
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Highlights
The nation's trade gap narrowed slightly in September to $56.5 billion from a revised $56.8 billion in August. The September deficit came in smaller than the market projection for a $58.5 billion gap and compares with the initial estimate for August of $57.6 billion. The improvement reflects exports rising notably faster than import gains. Today's report shows exports remaining on a healthy uptrend. Also, consumer-related imports picked back up, reflecting a little more optimism about the consumer sector.
The merchandise trade gap (Census basis) in September shrank to $63.7 billion from a revised $64 billion deficit in August. The goods gap excluding petroleum eased to $39.6 billion in September from $39.8 billion in August.
Export strength in September was in food, feeds & beverages, up $701 million; industrial supplies, up $657 million; consumer goods, up $327 million; and automotive, up $71 million. Capital goods exports slipped $396 million.
Import strength in September was in capital goods, up $754 million; automotive, up $311 million; and consumer goods, up $203 million. Industrial supplies declined $29 million despite a $410 million increase in the crude oil subcomponent. Foods, feeds & beverages slipped $29 million.
The oil trade deficit actually held steady in September at $24.1 billion, compared to $24.2 billion in August. Crude oil prices in September continued upward, rising to $68.51 per barrel from $68.09 per barrel in August. Essentially, the oil deficit held steady due to a drop in the number of barrels imported offsetting the price increase.
On a bilateral basis, the goods deficit with the European Union decreased from $10.2 billion in August to $6.4 billion in September. The goods deficit with China increased from $22.5 billion in August to $23.8 billion in September. The goods deficit with Mexico decreased from $6.9 billion in August to $6.3 billion in September. Country balances are not seasonally adjusted.
Today's numbers are one of the major inputs into revisions for third quarter GDP and will nudge up the third quarter growth rate. While the third quarter is ancient history by today's standards, the numbers do still indicate that export growth is on a healthy uptrend. However, we have not yet seen the worst of the impact of higher oil prices which will pull down nominal GDP growth in the fourth quarter. The big story today is really the jump in October import prices which will weigh on both bonds and equities.
The U.S. international trade gap narrowed noticeably in August to $57.6 billion from a revised $59.0 billion in July. The improvement was due to both a decline in imports and a rise in exports. Markets need to pick apart the details in this report and not just look at the headline number. Yes, we need to see continued export growth to support domestic manufacturing and with earlier declines in the dollar, we will likely get higher exports. But there will be interesting detail in imports. Much of the decline in imports in the last report was due to lower oil prices but also from dips in imports of consumer goods and motor vehicles. We will likely see a price induced rise in oil imports but it will be interesting to see whether businesses expect healthy consumer spending according to the strength or lack of strength in consumer related imports.
International trade balance Consensus Forecast for September 07: -$58.5 billion
Range: -$60.5 billion to -$57.0 billion
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Exports grow when foreign economies are strong. The weaker the foreign exchange value of the dollar, the less expensive goods and services are to foreigners, and this also helps spurt export activity. Imports grow when U.S. economic growth is robust. Imports are also spurred by a strong foreign exchange value of the dollar. |
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The international trade balance has posted a deficit almost continuously since the 1980s. Any trade deficit is a drag on U.S. GDP growth, but a smaller deficit adds to growth, while a larger deficit decreases GDP growth. |
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