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Economy in Brief

U.S. Trade Deficit a Deeper Than Expected Record in October
by Tom Moeller December 14, 2004

The U.S. foreign trade deficit deepened sharply to $55.5B in October, $4.5B deeper than September which was revised slightly shallower. Consensus expectations had been for a deficit of $52.4B. The latest deficit set a new record and was $3.6B deeper than the average in 3Q.

Total exports rose just 0.6% following an upwardly revised 1.3% gain in September. Goods exports inched up 0.3% (13.4% y/y) following a 1.7% September surge. Nonauto consumer goods exports fell 0.1% (+16.1% y/y) on the heels of two sizable monthly gains. Capital goods exports rose 0.3% (10.3% y/y).

Total imports reversed the prior month's decline and rose 3.4% due to higher petroleum imports, up 16.9% (+66.8% y/y) reflecting an 11.1% m/m rise in crude oil prices to an average $41.79/bbl. Since then crude oil prices have fallen roughly $12/bbl.

Imports of non-petroleum goods jumped 2.5% (12.4% y/y), driven by a 5.4% (10.5% y/y) surge in nonauto consumer goods. Capital goods imports edged 0.3% (16.7% y/y) higher following a 1.6% rise in September.

The US trade deficit with China deepened to another record of $16.8B ($124.1B in 2003). Exports to China rose 3.0% (5.9% y/y) but imports rose 7.3% (19.8% y/y). The US trade deficit with Japan eased to $5.9B ($66.0B in 2003) but the deficit with the Asian NICs deepened to $2.5B ($21.2B in 2003). The US trade deficit with the European Union deepened to $9.3 B ($97.9B in 2003).

"Offshoring in the Service Sector: Economic Impact and Policy Issues" from the Federal Reserve Bank of Kansas City cab be found here.

Foreign Trade Oct Sept Y/Y 2003 2002 2001
Trade Deficit $55.5B $50.9B $41.5B (10/03) $496.5B $421.7B $362.7B
  Exports - Goods & Services 0.6% 1.3% 11.3% 4.6% -3.1% -6.0%
  Imports - Goods & Services 3.4% -1.1% 18.5% 8.5% 2.1% -5.5%
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