U.S. Trade Deficit NarrowsSlightly But Petroleum Imports Drop Sharply

Though oil prices have risen, the recession in the U.S. economy has prompted a sharp cutback in the dollar amount of oil imports. That cutback helped the international trade deficit to narrow during August to $30.7.0B versus a little-revised July deficit of $31.9B. Consensus expectations had been for a deeper August deficit of $33.0B.

During August, oil imports were cutback by 5.7% m/m and have declined by more than one-half y/y due to lower prices. Moreover, the recession part of the story was clear: Imports of petroleum products in constant dollar terms fell 10.4% and were down 13.8% y/y. The decline in petroleum imports occurred despite higher crude oil prices. Prices rose to an August average of $64.75 per barrel versus the February low of $39.22.

The recession's influence also was apparent in nonoil imports which ticked lower by 0.1% but were down by 19.7% y/y. Real non-auto consumer goods imports fell by 1.9% (-16.3% y/y). Non-auto capital goods imports slipped 0.3% after a strong July gain and that left them off 19.9% from last year. Real automotive vehicles & parts imports, however, were strong for the third strait month. They rose 8.4% but they still were off by one-quarter from last year.

Reflecting the competitive value of the dollar, real merchandise exports fell during August just 1.5% following three months of increase. Nevertheless, recessions abroad lowered real exports by 19.5% y/y. The chained dollar value of real capital goods exports led the August decline with a 4.2% drop (-23.9% y/y. Non-auto consumer goods exports fell a lesser 1.4% (-11.4% y/y) while auto exports rose for the third strait month (-28.9% y/y).

Imports of services fell 15.4% y/y as travel imports were off 7.8%, i.e., fewer U.S. residents went abroad, and passenger fares were off 24.7%. Exports of services fell 11.8% as travel exports fell 20.3% y/y and passenger fares fell by one-quarter.

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

Monetary Policy Research and the Financial Crisis: Strengths and Shortcomings is today's speech by Fed Vice Chairman Donald L. Kohn and it is available here.

In the Wake of the Crisis is yesterday's speech by Fed Governor Daniel K. Tarullo and it can be found here. 

OECD gets upbeat - The OECD is getting much more upbeat in its assessment of the world's leading economies. It now contends that they may now be recovering or growing after hitting the bottom of their respective economic recessions in 2009. Recovery is at hand, according to leading indicators released Friday by the Organization for Economic Cooperation and Development that is the newest development.

Good and somewhat surprising news - The OECD trend-restored leading indicators continue to point to a recovery for most developed economies. France and Italy - that have both posted three or more months of an index level above the key 100 mark - are now, in the OECD lexicon, experiencing "potential expansion." The Composite Leading Indicator for the OECD's 30 members rose for the sixth straight month in August to reach 99.2 from 97.7 in July that is very close to the 100 line that it must cross to be truly on the road to an optimistic result. "OECD composite leading indicators for August 2009 continue to point to a recovery in all major economies with CLIs for France and Italy pointing to expansion," the OECD said.

Who’d a’ thunk it? Italy and France lead - For now that is certainly a breath of fresh air. Various national sources have been showing the same sorts of results. The surprise is that Italy joins France as one of the recovery leaders. Italy’s consumer confidence measures have been moving up briskly but Italy is still having some difficulties and business confidence has recently slipped. In contest France continues to pump out good figures as public spending there has been effective in stopping the bleeding and turning things around.

...and the US is - Over 12-months the US is still seeing its OECD CLI drop but over three-months the US index is rising nearly as fast as the indicators for the e-Zone. Over six months the US is still doing well but it is several steps behind the e-Zone reading and others. The six month horizon is the assessment favored by the OECD.

A good report card for the global economy - For now it’s a good report card on a global economy that is making progress. The rise up from this recession’s relatively deep pit is at a strongly sloped gradient compared to past cycles. Despite all the pessimism about growth and growth prospects the OECD’s CLI’s look very upbeat indeed.