from Follow the Money

Oil (enough said). The November US trade data

January 11, 2008

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The US November trade deficit is a bit larger than expected for the exact same reason China’s December surplus was a bit smaller than expected. Both countries import oil, pushing up their import bill. The average price of imported crude was $79.65 a barrel in November, up $5 a barrel from October. Seasonally adjusted petroleum imports rose $4.8b from October to November, bringing monthly imports up $34.4 billion.

And unfortunately, there is more bad news to come.  We don’t yet have data on the December price of imported oil, but if is around $80 a barrel, it would pull the average price of imported oil in 2007 up to around $65 a barrel. Some very rough ball park math suggests that a sustained $90 a barrel price for US oil imports would result in $100b increase in the 2008 oil import bill relative to United States 2007 import bill. 

The increase relative to the bill for the fourth quarter (annualized) would obviously be smaller.

Exports continued to be strong -- rising at a 13% y/y clip. Non-oil imports continue to be weak, rising at a 4% y/y clip.

There has been a noticeable slowdown in US imports from China. They rose 7.4% (y/y) when the October and November 2007 data is compared to the October and November 2006 data (imports from all of Asia were only up 3% over this time). That is slower than the 12.2% increase when January-November 2007 is compared to January-November 2006.

One other tidbit. Imports from Europe are up 15% in October and November v the same period last year. That either reflects the J-curve (higher import prices) or imports of refined petroleum from Europe.

For all of 2007, though, the US bilateral deficit with Europe and Canada is set to improve, while the US bilateral deficit with Asia will not (entirely because of the rise in the deficit with China).

UPDATE: I spoke too soon when I said export growth remained strong. Nominal y/y export growth is still strong. But, as Emmanuel (in the comments) observes, both real exports and real imports have been flat over the last several months(see Exhibit 11). That isn’t good news, on any level. Among other things, it suggests that the increase in oil prices will drive changes in the overall deficit.

UPDATE 2: the section on oil was edited for clarity. 

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