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 10/10/08 For Aug 2008 | ||||||||||||
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Highlights
The U.S. trade deficit in August narrowed notably - primarily due to a drop in oil imports. The overall U.S. trade gap narrowed to $59.1 billion from a revised $61.3 billion shortfall in July and came in slightly wider than the consensus forecast for a $59.0 billion gap. In August, exports dropped 2.0 percent while imports fell 2.4 percent. Meanwhile the nonoil goods deficit worsened to $33.6 billion from $29.3 billion in July. The disconcerting part of this report is the drop in exports. Based on growing weakness abroad, the U.S. is losing what had been a key source of strength. On the news, equities fell and rates rose.
The August decline in exports of goods reflected decreases in automotive vehicles; industrial supplies & materials; consumer goods; and foods, feeds, & beverages. Increases were seen in capital goods and the other goods category.
Helping to lower the oil deficit was a drop in oil prices. The average price of imported oil declined to $119.99 per barrel in August, easing off from July's record high of $124.66 per barrel.
Year-on-year, overall exports were down to up 15.9 percent in August from 20.1 percent in July while imports eased to up 13.4 percent from up 16.3 percent in July.
Again, the negative news from a broader perspective is the slowing in exports. For the near term, the numbers indicate that the net exports component of GDP will shrink, offsetting negatives elsewhere to some degree.
The U.S. international trade gap in July widened sharply on a surge in oil imports but otherwise actually improved. The overall U.S. trade gap jumped to $62.2 billion from $58.82 billion deficit in June. In July, exports advanced 3.3 percent while imports increased 3.9 percent. But the overall worsening was due to a spike in oil prices as the oil gap gushed to $43.4 billion in July from $37.3 billion in June. Meanwhile the nonoil goods deficit narrowed to $29.6 billion from $32.5 billion in June. But we are likely to see the oil gap shrink in August due to lower oil prices. But we also may be starting to see less vigorous exports as economies overseas have slowed significantly - some even posting negative growth.
International trade balance Consensus Forecast for August 08: -$59.0 billion
Range: -$64.5 billion to -$51.0 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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