Highlights
The U.S. trade gap in November shrank sharply, reflecting both a plummet in oil prices and a drop in demand. Unfortunately, demand is also declining overseas as exports posted another decline. The overall U.S. trade deficit narrowed sharply to $40.4 billion from a revised $56.7 billion shortfall in October. The November deficit was dramatically smaller than the consensus expectation for a $51.5 billion gap.

In November, exports posted a 5.8 percent drop while imports plunged a monthly 12.0 percent. The overall improvement in November was led by the oil deficit which narrowed to $19.4 billion from $32.3 billion in October. The nonoil goods deficit also shrank - to $31.4 billion from $35.3 billion the month before.

The November decline in exports of goods was seen in all major end-use categories but was led by a $4.2 billion fall in industrial supplies and $1.5 billion decrease for non-auto capital goods.

The oil deficit improved on both price and quantity. The average price of imported oil fell to $66.72 per barrel in November from $92.02 per barrel in October. The number of barrels of crude oil imported in the U.S. fell 19.3 percent in November. Again, both the price and quantity fall point to a dramatic softening in demand in the economy.

Year-on-year, overall exports fell to down 1.7 percent in November from up 5.2 percent in October while imports dropped to down 10.6 percent from up 3.9 percent the prior month.

Today’s numbers actually should cut economists’ forecasts for how deep the fourth quarter decline in GDP is. But looking ahead, the implication is that demand is weak both in the U.S. and abroad. Despite the narrowing in the trade deficit, the recession is still well underway.

Market Consensus Before Announcement
The U.S. international trade gap in October widened to $57.2 billion from a $56.6 billion deficit in September. The latest widening in the trade deficit was led by the oil deficit which grew to $32.7 billion from $31.9 billion in September. The nonoil goods deficit actually shrank an incremental amount - to $35.6 billion from $35.7 billion in September. In the latest month, the disconcerting part of the report was another drop in exports. In October, exports declined 2.2 percent while the larger imports component slipped 1.3 percent. Looking ahead, we will see dueling softness in both exports and imports as demand is weakening in both the U.S. and overseas. But another drop in oil import prices is likely to result in at least a temporary shrinkage in the U.S. deficit. This month there is a larger than usual forecast range.

International trade balance Consensus Forecast for November 08: -$51.5 billion
Range: -$58.0 billion to -$39.0 billion

2009 Release Schedule

Released On: 1/13 2/11 3/13 4/9 5/12 6/10 7/10 8/12 9/10 10/9 11/13 12/10 Released For: Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct