U.S. Trade Deficit Deepened Slightly in October

The U.S. foreign trade deficit deepened slightly to $57.8B from $57.1B in September which was slightly deeper than the deficit initially reported. Consensus expectations had been for a deficit of 57.3B.

The deficit averaged $58.7B during the first ten months of this year compared to an average of $64.0B during the first ten months of 2006.

U.S. exports rose 0.9% after a downwardly revised 0.8% during September. he revision was due a slightly lower gain in services exports

Exports of goods rose 0.7% (14.6% y/y) after a 1.4% jump during September. Exports of capital goods surged 3.4% (10.4% y/y) led by a 21.9% pop in exports of civilian aircraft (37.9% y/y. That rise was offset by a 10.4% decline (+5.1% y/y) in exports of computers while exports of electric apparatus rose 2.2% (4.6% y/y) after two months of sharp decline. Exports of nonauto consumer goods also fell by 3.2% +11.1% y/y).

U.S. exports of services rose 1.4% after a decline of 0.5% during September, initially reported as an increase. Travel exports recovered 1.4% (19.4% y/y) and passenger fares surged 2.2% 16.8% y/y).

Overall imports rose 1.0% as higher oil prices pushed up imports of industrial supplies by 3.6% (16.3% y/y). Imports of nonauto consumer goods also rose a firm 1.1% (4.6% y/y) but capital goods imports fell 1.2% (+6.6% y/y) after a 2.1% September jump.

The U.S. trade deficit in goods with China again deteriorated m/m to $25.9B versus a deficit of $24.4B during October of '06. During the first ten months of this year the deficit with China averaged $21.4B versus $19.1B in 2006. Exports to China rose 13.9% y/y and imports rose 7.6%.

Today's announcement by the Federal Reserve of actions by it, and other Central Banks, designed to address elevated pressures in short-term funding markets can be found here.Is the United States Losing Its Productivity Advantage? from the Federal Reserve Bank of New York can be found here.

During November, another jump in petroleum prices raised overall import prices by 2.7% after a 1.4% October increase. Consensus expectations had been for a 2.4% gain.

Petroleum prices, overall, gained 18.0% (68.7% y/y). Fuel oil prices rose 18.0% (68.7% y/y) and crude petroleum prices rose 7.5% (53.0% y/y).

Less petroleum, import prices rose 0.7% after a 0.5% rise uptick during October.

During the last ten years there has been a 66% (negative) correlation between the nominal trade-weighted exchange value of the US dollar vs. major currencies and the y/y change in non oil import prices. The correlation is a reduced 47% against a broader basket of currencies. Why a Dollar Depreciation May Not Close the U.S. Trade Deficit from the Federal Reserve Bank of New York is available here

Prices for industrial supplies & materials excluding petroleum surged 2.7% (7.9% y/y). The detailed import price series can be found in the Haver USINT database.

Capital goods import prices rose 0.2% (0.8% y/y). Prices of computers, peripheral and semiconductors fell 0.2% (-5.1% y/y). Less the high tech sector, capital goods prices rose an accelerated 0.3% (3.2% y/y).

Prices for imports of consumer goods rose 0.2% (1.7% y/y) as apparel prices were unchanged after firm gains early this year (1.5% y/y). Prices for furniture and household items rose 0.2% (2.0% y/y).

Overall export prices were strong again and posted a 0.9% gain (6.1%y/y). Agricultural prices rose another strong 1.4% (23.0% y/y) while nonagricultural prices also were firm and rose 0.8% (4.6% y/y).

Global Savings, Investment and World Real Interest Rates is a 2007 working paper from the Royal Bank of Canada and it can be found here.

Japans exports and imports each show generally declining trends. Imports are up by just 4.4% year/year while exports are advancing at a pace of 11.4%. Japan’s services deficit is shrinking. Its good surplus and current account surplus are each widening. The current account surplus is widening in both dollar and yen terms (see table).

Recent macroeconomic data make it clear that Japan’s economy is slowing. This is reflected in the import slowing that is in progress. Japan’s imports fell by a sharp 6.3% in August then by 0.1% in September before rebounding with a rise of 0.8% in October. Import weakness is likely a reflection of the weakness in domestic demand.