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 11/13/08 For Sep 2008 | ||||||||||||
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Highlights
The U.S. trade deficit in September continued to shrink but the nonoil disturbingly widened on a drop in exports. The overall U.S. trade gap shrank further to $56.5 billion from a revised $59.1 billion deficit in August and came in narrower than the consensus forecast for a $57.0 billion shortfall. In September, exports fell 1.7 percent while the larger imports component declined 2.2 percent. The overall improvement was largely seen in a smaller oil deficit which narrowed--to $32.1 billion from $35.6 billion in August. However, the nonoil goods deficit widened on the drop in exports-to $35.6 billion from $33.7 billion in August. While the drop in imports from lower oil prices is good, the sharp fall in exports is disconcerting.
The September decline in exports of goods was seen in all major end-use categories but was led by a $4.2 billion fall in capital goods and a $4.1 billion drop in industrial supplies.
Once again, lower oil prices had a key role in shrinking the oil deficit. The average price of imported oil declined to $107.58 per barrel in September, declining from $119.99 per barrel in August.
Year-on-year, overall exports were down 6.0 percent in September while imports were down 5.6 percent.
Normally, a narrower trade gap is very positive news for the economy. However, the drop in exports as negative news offsets part of the good news from cheaper oil. Yes, the report is favorable for helping consumer budgets and business costs, but manufacturing took a hard blow. This is another sign that the fourth quarter will be quite negative.
The U.S. international trade gap 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 $61.3 billion shortfall in July. 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. Helping to lower the oil deficit was a drop in oil prices. Looking ahead, a further drop in oil prices will likely help the trade gap either narrow further or at least remain relatively unchanged.
International trade balance Consensus Forecast for September 08: -$57.0 billion
Range: -$59.0 billion to -$52.8 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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