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Economy in Brief

Record August U.S. Trade Deficit Swelled By Higher Oil Prices
by Tom Moeller October 12, 2006

The U.S. foreign trade deficit surged to another record in August of $69.9B versus an unrevised $68.0B in July. The figure was materially deeper than Consensus expectations for a shallower deficit of $66.8B.

A rise in the per barrel cost of imported crude oil to $66.12 (+25.1% y/y) in August ran counter to the forty cent m/m decline in the price of Brent Crude to $73.40. Brent crude then fell eleven dollars per barrel in September and the price of oil in October is down another five dollars to $57 per bbl. The rise in oil prices lifted the value of energy-related petroleum products by 7.2% m/m (29.6% y/y). The quantity of petroleum product imports rose 6.3% m/m (4.0% y/y).

Overall imports of goods & services jumped 2.4% m/m during August, however, the rise in petroleum imports wasn't the only source of strength. Imports of nonpetroleum products rose 2.7% (13.4% y/y) as imports of capital goods increased 2.7% (14.2% y/y) and nonauto consumer goods imports rose 1.8% (12.4% y/y). Automotive imports also posted a firm 2.5% (5.7% y/y) gain while imports of foods, feeds & beverages jumped another 3.4% (12.9% y/y).

Total exports rose 2.3% in August and recovered a little revised 1.3% July drop. The turnaround came as capital goods exports jumped 3.8% (12.4% y/y), led by an 11.0% (-0.7% y/y) surge in commercial aircraft and a 12.3% (18.0% y/y) jump in computer exports. Exports of telecommunications equipment rose 4.3% (17.3% y/y) and exports of nonauto consumer goods surged another 2.2% (15.8% y/y).

Service exports inched up just 0.5% (8.4% y/y) as travel exports fell 1.1% (+5.1% y/y) and passenger fares also fell 1.8% (-2.5% y/y). These declines were offset by a 3.8% (19.8% y/y) gain in other transportation services. Imports of services fell for the second consecutive month. The 0.2% (+9.9% y/y) decline owed to a 2.0% (+5.4% y/y) drop in travel and a 2.3% (+5.7% y/y) decline in passenger fares.

The U.S. trade deficit in goods with China deteriorated to a record $22.0B in August ($201.5B in 2005) as exports fell 5.9% (+22.5% y/y) and imports rose 8.5% (19.2% y/y). With the newly industrialized Asian countries, the balance of goods trade improved slightly m/m to a deficit of $1.6B (-$15.8B in 2005) as exports surged 9.0% (6.9% y/y) and imports rose 4.8% (11.3% y/y).

Minutes to the September 20th meeting of the Federal Open Market Committee are available here.

Foreign Trade  August July Y/Y 2005 2004 2003
U.S. Trade Deficit $69.9B $68.0B $58.7B
(8/05)
$716.7B $611.3B $494.9B
Exports - Goods & Services 2.3% -1.3% 13.4% 10.7% 13.4% 4.2%
Imports - Goods & Services 2.4% 0.9% 15.3% 13.0% 16.7% 8.3%
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