from Follow the Money

Record $66.1 billion trade deficit

November 10, 2005

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Cannot say that I am totally surprised by a record monthly trade deficit.  I have long argued that the deficit was likely to continue to expand.

In September, goods exports were down $3.3 billion; goods imports up $3.8 billion.  That produces a bigger deficit even if the "services" surplus expanded.   All in all the US imported $171.3 billion, and exported $105.2 billion.  

What I does surprise me is that -- on preliminary examination -- most of the expansion of the trade deficit does not seem to be the product of Katrina.

Exports of civil aircraft fell by $2.4b.  August was a good month, September was a bad one.   That trumped small Katrina related falls in agricultural exports (the fall was a bit smaller than I expected, but my expectations had no real grounding in data) and exports of "industrial supplies" like chemicals.   No petroleum, no basic chemical industry. 

Oil imports rose by about $1 billion on a seasonally adjusted basis, mostly because of higher prices. [UPDATE: Higher natural gas imports added about a billion as well.]  I suspect the US should expect another increase when the October data comes out, with higher volumes contributing as well.

But non-oil non-gas goods imports also shot up -- rising almost $2 billion [UPDATED, Revised down to reflect higher gas imports].  That to me is the most signficant move, as I have consistently been puzzled by the absence of monthly growth in non-oil imports number.  Now it looks like that non-oil imports are heading up -- as one would expect with growing US consumption.  [UPDATE:  the rise in non-oil goods imports may also reflect a rise in non-petroleum energy imports ...  I need to explore this further][UPDATE 2: Natural gas imports are up by about a billion ... ]

Detroit's troubles probably aren't helping here either -- though that may be a bigger story in the October data.

A few other items:

Overall exports to Europe continue to grow about twice as fast (on a y/y basis) as US exports to the "Pacific Rim."  10% v. 5%.   My standard refrain applies: exchange rates matter, not just relative growth rates.

And there is no sign Chinese exports to the US are slowing.  September imports from China were up 27% y/y, more or less the same pace as they have been growing all year.  YTD imports from China are up 26%, exports to China are up 16.5%.

In practical terms, that means that in September of 05, the US exported $3.2 billion to China, and imported $23.3 billion, for a monthly trade deficit of over $20 billion.   That is roughly equal to the monthly US oil import bill.

In September 2004, the US exported $2.85 billion to China, and imported $18.4 billion, for a monthly deficit of a bit over $15 billion.

Global balances matter, not bilateral ones -- but in this case, the evolution of the bilateral balance matches the evolution of the global balance.  Or rather imbalance.  

All data come from the BEA, and all numbers were done quickly, so they should be double checked. 

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