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Economy in Brief

U.S. Trade Deficit Unexpectedly Narrowed
by Tom Moeller September 13, 2005

The U.S. foreign trade deficit narrowed to $57.9B in July versus the June deficit of $59.4 which was deeper than initially reported. Consensus expectations had been for a deficit of $59.7B. Despite the narrowing, the U.S. trade deficit remained in record territory with the average during the last three months a record $57.8B.

Adjusted for price inflation, the customs value of the U.S. trade deficit narrowed to $54.6B, the narrowest since March.

Total exports rose a paltry 0.4% following two months of having been roughly unchanged. The 0.5% (10.6% y/y) rise in goods exports last month was again held back by a decline in food, feeds & beverages which fell 2.8% (+9.0% y/y). Capital goods exports rose 0.6% (8.3% y/y) though exports of advanced technology products fell 10.2% (NSA, +8.6% y/y). Nonauto consumer goods exports rose 0.5% (13.0% y/y)

Services exports rose 0.1% (10.1% y/y) for the second month.

The 0.7% decline in imports of goods & services was due mostly to a 2.2% decline in capital goods (+9.5% y/y) and a 2.2% (+7.8% y/y) decline in nonauto consumer goods. Imports of petroleum products rose 5.2% (45.5% y/y) as the average price of crude oil rose to $49.03 per bbl. (46.9% y/y). Imports of non-petroleum goods fell 1.4% (+7.6% y/y).

The US trade deficit with China remained about stable at $17.7B ($161.9B in 2004) but the US trade deficit with Japan improved slightly to $6.6B ($75.6B in 2004). The monthly trade deficit with the Asian NICs also narrowed slightly to $1.2B ($21.9B in 2004) but the deficit with the European Union deepened to $11.2B ($109.3B in 2004).

A Look at China's New Exchange Rate Regime from the Federal Reserve Bank of San Francisco is available here.

Also from the San Francisco Fed, Understanding the Twin Deficits: New Approaches, New Results can be found here.

Foreign Trade July June Y/Y 2004 2003 2002
Trade Deficit $57.9B $59.5B $51.3B (7/04) $617.6B $494.8B $421.2B
  Exports - Goods & Services 0.4% 0.1% 10.4% 12.6% 4.6% -3.0%
  Imports - Goods & Services -0.7% 2.1% 11.3% 16.6% 8.5% 2.1%
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