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Economy in Brief

U.S. Trade Deficit Surged Due to Higher Imports
by Tom Moeller March 9, 2006

The U.S. foreign trade deficit surged during January to $68.5B, another record, and far exceeded Consensus expectations for a deficit of $66.5B. The December deficit in goods & services trade was revised slightly lower to $65.1B.

Overall imports rose 3.5% in January and the gains were quite broad, starting with a 5.6% (48.3%) spike in petroleum imports. That gain was bolstered by a 4.4% rise in crude oil prices (46.0% y/y) to an average $51.93 per bbl., the first m/m gain since September. Crude prices gave back roughly half of that increase last month and very recently fell even lower. The quantity of crude oil imports fell during January (-6.2% y/y) for the second consecutive month.

Imports of nonpetroleum products similarly were strong during January, rising 3.8% (11.2% y/y). The gain was led by a 3.8% (9.9% y/y) rise in capital goods and a 2.9% (5.6% y/y) increase in nonauto consumer goods. Imports of advanced technology products fell 8.1% (NSA, 15.2% y/y).

Total exports also were strong during January. A 2.5% increase was led by a 2.9% (16.3% y/y) gain in capital goods though exports of nonauto consumer goods fell 1.3% (+11.3% y/y). Exports of advanced technology products dropped 10.1% (NSA, +20.7% y/y) while exports of foods, feeds & beverages jumped 11.2% (15.7% y/y).

With China the US trade deficit reversed most of an improvement during December and deteriorated to $17.9B ($201.6B for 2005) but y/y exports were up by more than one third. The trade deficit with Japan improved for the third straight month to $6.5B ($82.7B in 2005) though the trade deficit with the Asian NICs nearly doubled to $2.2B ($15.9B in 2005). The deficit with the European Union improved for the third consecutive month $9.7B ($122.4B in 2005) as imports fell 6.0% (+12.7% y/y).

During 2005, the total real value of US international trade (exports plus imports) rose to 27.2% of constant dollar GDP, up from 20.3% ten years earlier and was more than double the percentage during 1985.

Current account, remarks by Alan Greenspan, are available here.

Foreign Trade Jan Dec Y/Y 2005 2004 2003
Trade Deficit $68.5B $65.1B $58.3B (1/05) $723.6B $617.6B $494.8B
  Exports - Goods & Services 2.5% 2.2% 12.0% 10.5% 12.6% 4.6%
  Imports - Goods & Services 3.5% 1.7% 14.0% 12.8% 16.6% 8.5%
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