The U.S. trade balance in October widened somewhat on higher oil imports and on slippage in the services surplus. Weakness in Europe and Japan is hitting the shores of the U.S. as the decline in exports was widespread. The trade deficit worsened to $42.2 billion from $40.3 billion in September (originally $41.5 billion). The market consensus called for a trade gap of $42.8 billion. Exports fell 3.6 percent in October, following a 3.1 percent rebound the month before. Imports fell 2.1 percent after gaining 1.5 percent in September.
The widening in the trade gap was led by the petroleum deficit which increased to $24.6 billion in October from $21.6 billion in September. However, the non-petroleum goods shortfall shrank to $33.8 billion from $35.2 billion for the previous month. The services surplus slipped to $16.9 billion from $17.0 billion in September.
On a not seasonally adjusted basis, the October figures showed surpluses, in billions of dollars, with Hong Kong $1.9 ($2.2 for September), and Australia $1.8 ($1.9), among others. Deficits were recorded, in billions of dollars, with China $29.5 ($29.1), European Union $10.6 ($8.6), OPEC $8.6 ($7.1), Japan $7.0 ($4.8), Germany $5.4 ($5.2), Mexico $4.4 ($4.8), and Canada $1.9 ($1.9), among others.
It is becoming clearer that sluggishness in manufacturing is significantly due to a decline in global trade. Weakness in goods exports showed up in all major end-use categories, led by a $2.9 billion drop in industrial supplies, including a subcomponent fall of $0.9 billion in nonmonetary gold. Other declines were for capital goods excluding autos, down $1.9 billion; automotive, down $0.4 billion; consumer goods, down $0.1 billion; and foods, feeds & beverages, down $1.4 billion.
On the import side, all major end-use categories were down except for industrial supplies which rose $0.4 billion. However, the crude oil subcomponent worsened $2.1 billion. Also, on the downside consumer goods dropped $3.6 billion, automotive dipped $0.5 billion, and capital goods excluding autos declined $0.4 billion.
Today's report is not good news for global economic growth. There was shrinkage on both the export and import sides. U.S. manufacturers clearly are suffering in part to recession in Europe and Japan. Also, U.S. businesses may be a little skeptical about consumer demand.
Market Consensus before announcement
The U.S. international trade gap in September improved, largely on petroleum. And the best news is that exports rebounded. The trade deficit narrowed to $41.5 billion from $43.8 billion in August. Exports rebounded 3.1 percent, following a 1.0 percent decline in August. Imports increased 1.5 percent after slipping 0.2 percent the month before. The shrinking in the trade gap was led by the petroleum deficit which decreased to $21.7 billion in September from $23.5 billion in August. The non-petroleum goods shortfall actually grew to $35.2 billion from $34.9 billion for the prior month. The services surplus improved to $15.9 billion from $15.1 billion in August.