U.S. Trade Deficit Increases Due To Higher Oil Costs, Improved Economy

Following months of shrinkage due to lower oil prices and a poor economy, the September U.S. trade deficit widened significantly. The deficit of $36.5B followed a little-revised August figure of $30.8B and the m/m deterioration greatly exceeded Consensus expectations for a deficit of $31.6B. The latest figure was the deepest trade shortfall since January. The rise in oil prices is evident in the trade deficit figures adjusted for inflation. The m/m deterioration in the real deficit was just under half that for nominal. However, offsetting that was the improved economy which also lifted the inflation-adjusted deficit as real imports jumped 6.2% m/m and by 10.1% over the last three months.

During September, petroleum imports jumped 20.9% after having risen by over one-half since February. Higher prices prompted that increase as crude oil costs rose to a September average of $68.17 per barrel versus the February low of $39.22. Since then crude oil has risen even further to roughly $75 per barrel. The firmer economy raised real imports of petroleum products by 6.9% during September and by 7.7% over the last twelve months. That rise compares to declines of between one and four percent during each of the last three years.

Economic recovery also was apparent in real nonoil imports which rose 4.2% during September and 11.3% during the last three months. These gains lessened the y/y decline to 14.8% from its worst of 24.6%. Real non-auto capital goods imports rose 2.5% (-18.9% y/y) and by 6.7% during the last three months. Real nonauto consumer goods rose 1.9% and 5.5% since June. Both of these increases are turnarounds from sharp declines through June. Real automotive vehicles & parts imports also turned higher by 11.4% (-12.1% y/y) in September and by nearly one-half since June. Despite the lower value of the dollar, economic recovery is further suggested by better travel figures. Imports of services have recently risen, with travel imports strong during three of the last four months as more U.S. residents went abroad.

Reflecting the competitive value of the dollar, real merchandise exports during September rose 4.4% (-9.5% y/y) following three months of 7.0% increase. That's a turnaround from 20% rates of decline this summer. The chained dollar value of real capital goods exports led the September increase with a 5.2% gain (-14.3% y/y) which reversed an August drop. Non-auto consumer goods exports also rose 3.6% and the y/y decline eased to 5.6% from the peak of -15.7%. Auto exports were strong for the fourth straight month and the y/y decline of 26.2% was half its worst reading. Exports of services also have been strong of late.

The international trade data can be found in Haver's USECON database. Detailed figures are available in the USINT database.

Trade, Globalization and the Financial Crisis from the Federal Reserve Bank of Dallas is available here.