October Trade Deficit – Another Dismal Report

http://www.census.gov/foreign-trade/Press-Release/current_press_release/ft900.pdf

As reported by the U.S. Bureau of Economic Analysis (BEA) this morning, America’s trade deficit contracted only very slightly in October, but that’s only because the deficit for September was revised upward.  (See the above link to the report.) 

The overall trade deficit shrank for the 4th month in a row to -$43.47 billion, its lowest level in 10 months.  Here’s the chart:

Balance of Trade

But that overall figure can be deceptive.  In spite of a decline in oil prices and a corresponding decline in petroleum imports, petroleum exports continued to swell in October to a record level and are now 129% higher than in January, 2010.  In addition, something that I didn’t realize until I read this CNBC article this morning, exports are also being propped up by exports of gold:

… for the first 10 months of 2011, non-monetary gold exports totaled $27.8 billion, compared to $14.8 billion in the same period last year.

What really matters is the balance of trade in manufactured goods.  There, the news isn’t so hot.  Exports of manufactured goods have stalled, rising less than $1 billion in the last four months.  Our trade deficit in manufactured goods worsened in October for the 2nd month in a row.  So, while the Obama administration remains pretty much on track for meeting its goal of doubling exports in five years (again, propped up by petroleum and gold exports), progress in manufactured goods is lagging.  In fact, both imports and exports of manufactured goods seem to have flattened out and threaten to shrink, a clear red flag for the possibility of a coming recession.  Here’s the charts:

Obamas Goal to Double Exports        Manf’d Goods Balance

Other bad news in the report:

  • Imports of food, feeds and beverages rose to a record in October.
  • Imports from China rose to a record in October, and our trade deficit with China is on track to rise to a new record for 2011.
  • Imports from Japan rose to their highest level in 3-1/2 years. 

The October trade deficit report also marks a very sad milestone, so significant that I’ll cover it in a subsequent post.  Stay tuned.

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