Release: Trade Balance m/m (Nov)
Consensus Forecast: -$44.8B
Date/Time: 1/13/12 8:30AM ET (13:30 GMT)
Can US Trade Help Turn Around This Week’s Gloomier US Data?
On Friday we get a look at latest trade balance figures from the US for November and we’ll see if exports managed to climb in the US.
With consumer spending – via retail sales – coming in weaker than expected, stimulus from government spending winding down, and corporate investment also soft, it will be up to trade, or better exports, to try and boost overall US GDP.
The consensus forecast is for the trade deficit to have widened to $44.6 billion in November from a $43.5 billion shortfall in October.
In the chart above we see that the trade deficit has been gradually narrowing over the previous 4 months, a positive for growth.
Looking at exports vs imports we see that part of the improvement is coming from US consumers/businesses lowering imports, and prior to October, a slight pick-up in exports. In October both imports and exports decreased showing that both US demand for foreign goods and foreign demand for US goods weakened, a sign that global economic activity was impacted by the sovereign debt situation in Europe.
From BEA: “The U.S. Census Bureau and the U.S. Bureau of Economic Analysis, through the Department of Commerce, announced today that total October exports of $179.2 billionand imports of $222.6 billion resulted in a goods and services deficit of $43.5 billion, down from $44.2 billion in September, revised. October exports were $1.5 billion less than September exports of $180.6 billion. October imports were $2.2 billion less than September imports of $224.8 billion”
Some highlights from Census.gov:
- October exports to China ($9.7 billion) were the highest since December 2010 ($10.1 billion).
- October imports from China ($37.8 billion) were the highest on record.
- October exports to Japan ($6.1 billion) were the highest since March 1997 ($6.2 billion).
- October imports from Japan ($12.3 billion) were the highest since April 2008 ($13.0 billion).
- October exports to South and Central America ($15.3 billion) were the highest on record.
In the 2nd quarter trade (exports-imports) contributed 0.24 percentage points to GDP, and in the 3rd quarter trade added 0.43 percentage points to GDP.
US Dollar Index Rises, Should Pressure US Exports
In November, the US dollar rallied which may hamper export growth as US exports were more expensive in foreign markets,
Oil Prices Higher, Oil Import Bill Should Rise
It’s interesting though because despite the gain in the US Dollar index oil prices rallied during November as well, presented a break of the inverse relationship between oil and the dollar that we usually are accustomed to.
The the average price per barrel of crude oil has also been on the decline for the last 5 months. The oil bill for the month of November however should rise oil prices rebounded during November.
The first half of November saw oil prices rise from the $90 barrel level to above $100, though they did ease to the $95 a barrel level in the middle to late part of November.
Here’s a look at the correlation between oil and the Dollar Index over the last year, showing the 2 moving in the same direction during November, something that goes against the usual relationship between the two.
Summary – Much Likelier Deficit Widens And Not Narrows
Therefore with a stronger dollar during the time period measured we can expect exports to be impacted negatively, while higher oil prices can cause the import bill to increase. That tells us that the trade balance is likely to widen, as expected by the consensus forecast.
Most likely the answer to the question posed then at the beginning of this article is no, trade data on the face of it does not look like we have the conditions for a positive surprise. However, if exports did pick up, and we do have another month in which the trade balance narrows, that would be a positive sign for the US economy.
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