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Economy in Brief

U.S. Trade Deficit Narrowed as Oil Prices Fell
by Tom Moeller January 12, 2006

The U.S. foreign trade deficit in November narrowed to $64.2B from the record $68.1B the prior month which was revised slightly shallower from the initial estimate. Consensus expectations had been for a narrowing to $66.1B.

Imports of petroleum products reversed about half of the prior month's gain with a 3.1% decline. The drop was wholly due to lower prices. The per barrel price of crude oil dropped 7.3% (+26.6% y/y) to $52.16 but the per day volume of crude oil imports rose 6.7% (-4.6% y/y). In December, crude oil prices backed up to roughly $53.50 but in January have risen another $5.00 per barrel.

A 1.1% (+8.3% y/y) decline in imports of nonpetroleum products reversed much of the October increase. Imports of nonauto consumer goods fell 3.1% (+2.6% y/y) and capital goods imports slipped 0.1% (+8.1% y/y). Imports of advanced technology products were unchanged (NSA, 8.1% y/y) following several months of strong gain.

Total exports rose strongly for the third of the last four months. The 1.8% increase was led by a 3.7% (16.1% y/y) jump in capital goods. Exports of advanced technology products added 0.4% (NSA, 16.5% y/y) to the 10.4% spike in October. Consumer goods exports also reversed the prior month's weakness and surged 6.2% (12.3% y/y).

Services exports fell moderately for the second consecutive month. The 0.7% (+6.4% y/y) decline owed to a 2.5% (+6.4% y/y) decline in private travel and a 3.5% (+8.2% y/y) drop in passenger fares. Imports of services rose 0.5% (5.8% y/y) as passenger fares rose 1.6% (4.6% y/y) but travel fell 1.3% (+0.1% y/y). Travel imports have fallen 9.8% since the peak in April.

The US trade deficit with China improved to $18.5B ($161.9B in 2004) from the record deficit in October. The US trade deficit with Japan also improved very slightly m/m to $7.3B ($75.6B in 2004) but the monthly trade deficit with the Asian NICs deepened sharply to $2.5B ($21.9B in 2004). The deficit with the European Union improved $11.2B ($109.3B in 2004) from the record of $12.1n October.

What Determines Bilateral Trade Flows? from the Federal Reserve Bank of Chicago can be found here.

Foreign Trade Nov Oct Y/Y 2004 2003 2002
Trade Deficit $64.2B $68.1B $59.0B (11/04) $617.6B $494.8B $421.2B
  Exports - Goods & Services 1.8% 1.5% 10.8% 12.6% 4.6% -3.0%
  Imports - Goods & Services -1.1% 2.2% 10.1% 16.6% 8.5% 2.1%
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