Need To Know News

The September Tade Deficit shrunk 4.4% to $56.5 bln, its lowest level since October ‘07, following a $59.1bln deficit reported in August. The deficit reduction in Septemeber will provide a modest boost to the revised Q3 GDP; however, this month’s data shows a market deceleration in global trade activity going into the financial markets meltdown.

The value of exports fell 6% to $155.4bln in September, with the $10.4bln month-over-month declines reflecting the largest drop on record. The total value of imports fell 5.6%, or $12.1bln to $211.9bln in September, also  the largest monthly drop on record.

The value of imports from OPEC countries fell to its lowest level since March at $19.1, reflecting the continued drop in the price of, and demand for Crude in the US. The quantity of crude oil imported fell to 253.3mln barrells, which was the lowest amount since March ‘03.

The Chinese trade deficit grew to a new record at $27.8bln, as the value of Chinese imports rose to a record $33.1bln while exports to China fell to their lowest level since July ‘07 at $5.3bln. The value of exports to the EU fell to $20.9bln in September, the lowest since December.  The value of exports to Canada grew marginally to $22.2bln in September, and the value of Canadian imports to the US grew modestly to $29.9bln.

• MFR expects a September Trade Deficit of $56bln following a $59.1bln deficit in August

The value of exports is expected to fall nearly 3% in September as a result of lower commodity costs and reduced demand via the global slowdown. Global trade activity is expected to slow considerably going forward, nonetheless declines in US imports over the period should yield a $2.1 reduction in the US trade deficit and provide a modest boost for Q3 GDP.

The value of imports in October are expected to fall more than 3% following a 2.4% decline in August. Recent USD gains should put further pressure on the market for imports going forward, though the impact is likely to have a lagging impact and may not be clearly reflected in the September data. It remains to be seen exactly how the US trade deficit will be affected by the global slowdown, though on balance weakness is more likely to benefit the market for exports as recent USD increases makes overseas products cheaper.

Related data:

September ISM Manufacturing Exports Index: 52 vs. 57 prior

September ISM Manufacturing Imports Index: 44 vs. 48.5 prior

September ISM-NMI Exports Index: 50.5 vs. 44.5 prior

September ISM-NMI Imports Index: 47.5 vs. 46 prior

The trade deficit was $59.1 billion in August, in line with analysts expectations and an improvement from the revised July deficit of $61.3 billion. The August trade deficit shrank as imports fell faster than exports. Exports declined 2% in August as goods exports declined 2.6% and service exports fell 0.4%. That was the largest percentage decline in exports since June 2004. Imports fell even more, down 2.4%, on a 3.3% decline in goods imports and a 2.4% increase in services imports.

Goods exports declined by over $3 billion in August, the largest dollar decline since 2001. More than half of the lost exports were in the auto sector, down $1.7 billion from July. But consumer goods were down $800 million as almost every consumer category showed declining exports, gold exports declined $900 million and petroleum exports declined $500 million. Civilian aircraft exports continued strong, adding $1.3 billion to exports. The Boeing strike did not begin until September and is not reflected in these numbers. Other export gains were in drilling equipment, aircraft engines and chemicals and fuel oil.

The large decline in goods imports was all from oil, non-petroleum imports continued to increase by 0.9% but oil imports declined 14% as prices fell 3.7% to $119.99 per barrel and the number of barrels imported fell almost 10%. The weakening economic picture reduced imports of motor vehicles by $1.2 billion and other capital equipment by $800 million. However, consumer goods imports climbed $2.3 billion as pharmaceutical and cotton household goods imports rose. The rise services imports was largely due to a jump in payments of royalties and license fees to foreigners.

In real terms goods exports fell 0.2% in August, its first decline since March. However, the July and August exports on average are still 4.5% higher than the Q2 number which should add some support to Q3 GDP. Real goods imports averaged over July and August show only a modest 0.4% increase. Thus, net exports should make a positive contribution to Q3 GDP growth, one of the few bright spots that can be expected.

• The August Trade Balance is expected to show a $58bln deficit after a $62.2bln deficit in July

Deteriorating growth conditions overseas, combined with a solid USD rebound over the period, should greatly hinder export growth over the reference period. Exports are expected to fall 2% to $164.7bln following four consecutive monthly increases which yielded an $18.4bln increase in the value of exports.

Despite the expected reduction in exports over the period, the August Trade Deficit is expected to narrow as result of an even larger reduction in imports. August imports are expected to fall 4% on reduced demand in the US and a sharp reduction in energy prices. While a lower deficit is viewed as a positive, the August data will carry a more dubious dimension as they may indicate the beginning of a sharp downturn in the international marketplace.

Related data:

• The September ISM Manufacturing Exports Index fell to 52 from 57 in August and 54 in July
• The September ISM Manufacturing Imports Index fell to 44 from 48.5 in August and 46 in July
• The September ISM-NMI Exports Index grew to 50.5 from 44.5 in August and 47.5 in July
• The September ISM-NMI Imports Index was 47.5 from 46 in August and 49 in July

The July Trade Balance showed a $62.2bln deficit, $4bln more than expectations and against an upwardly revised $58.8bln deficit in June (-$56.8bln)
.
The net Goods deficit was a record $74.9bln, versus $70bln in June, while the Services Surplus was $12.7bln, also a record.

July Imports were $230.3bln, up 3.3% m-o-m. Imports of Goods were up 8.1% at $195.7bln with overall Goods and Services Imports climbing 8.7% to 230.3bln.

July Exports of Goods and Services, at $168bln, and Goods Exports at $120.8bln, were also at record highs.

Petroleum Imports were $51.4bln and Exports were $8bln, leaving a Petroleum Deficit of $43.4bln, a record high. The average price per barrel reached a record high of $124.66. Unsurprisingly, the deficit with OPEC reached a record $24.2bln on imports of $29.6bln.

The July Non-Petroleum Goods deficit of $29.6bln was at the lowest level since October 2002.

July Exports of petroleum, at $8bln, and exports of non-petroleum goods, at $113.6bln made new highs as well. Exports of Industrial Supplies and Materials, Capital Goods, Automotive Vehicles, Parts and Engines and Consumer goods all hit record highs.

The deficit with China was $24.8bln in July and and $142.3bln year-to-date.

Imports are up 16.8% y-o-y at $33bln and Exports were up 20.1% at $28.2bln. On a monthly basis imports were slightly more in dollar terms than exports so the overall deficit increased by about $4bln. Energy continues have enormous influence on prices overall.

• July Trade Balance Expected to show a deficit of $58bln from a $56.8bln deficit in June
• Exports are expected up 0.1% following a 4% June increase
• Imports are expected up 2.4% following a 2% rise in June

Export growth is expected to slow following three consecutive months of considerable improvement. The modest rise in the value of USD over the second half of July, combined with deteriorating economic conditions overseas, drives expectations for more modest export growth over the period. There is the potential for last month’s export momentum to spill over into July, which could yield a higher-than-expected result.

Export prices rose 1.4% in July, the most since March, which was largely a result of the 6.7% increase in Ag prices. While these increases will have a direct impact on export demand over the period, the relative inelasticity of demand (demand less response to changes in price) for Ag products could mean as stronger-than-expected result.

Imports are expected to receive a boost from energies as a result of higher prices and an increase of volume to 13.3mln BPD in July from 12.8mln in June. Petroleum product prices rose 4% in July and Natural Gas prices rose 5.8%. Overall import prices in July grew at their lowest pace since February at 1.7%, with non-petroleum import prices up 0.9%. However, this is unlikely to have a significant impact on demand for non-petroleum products as US consumers continue to tighten their belts in the midst of the US slowdown.

Related data:
• The ISM Manufacturing Exports Index grew to 57 in August following a 54 reading in July and a 58.5 reading in June
• The ISM Non-Manufacturing Exports Index fell to 44.5 in August from 47.5 in July and 52 in June

• July Trade Balance Expected to show a deficit of $58bln from a $56.8bln deficit in June
• Exports are expected up 0.1% following a 4% June increase
• Imports are expected up 2.4% following a 2% rise in June

Export growth is expected to slow following three consecutive months of considerable improvement. The modest rise in the value of USD over the second half of July, combined with deteriorating economic conditions overseas, drives expectations for more modest export growth over the period. There is the potential for last month’s export momentum to spill over into July, which could yield a higher-than-expected result.

Export prices rose 1.4% in July, the most since March, which was largely a result of the 6.7% increase in Ag prices. While these increases will have a direct impact on export demand over the period, the relative inelasticity of demand (demand less response to changes in price) for Ag products could mean as stronger-than-expected result.

Imports are expected to receive a boost from energies as a result of higher prices and an increase of volume to 13.3mln BPD in July from 12.8mln in June. Petroleum product prices rose 4% in July and Natural Gas prices rose 5.8%. Overall import prices in July grew at their lowest pace since February at 1.7%, with non-petroleum import prices up 0.9%. However, this is unlikely to have a significant impact on demand for non-petroleum products as US consumers continue to tighten their belts in the midst of the US slowdown.

Related data:
• The ISM Manufacturing Exports Index grew to 57 in August following a 54 reading in July and a 58.5 reading in June
• The ISM Non-Manufacturing Exports Index fell to 44.5 in August from 47.5 in July and 52 in June

The June Trade Balance showed a $56.8bln deficit, less than the $62bln analysts were expecting and following a revised $59.2bln deficit in May (previously reported as $59.8bln).

The net goods deficit fell to $70bln, while services showed a record $13.3bln surplus.

The petroleum deficit was a record $36.4bln, up from $32.8bln last month. On the bright side, the non-petroleum goods deficit – $32.2bln – was the lowest since Feb-03.

The narrower overall June trade deficit came from a 4% increase in exports (to a record $164.4bln), the largest gain since Feb-04. Imports rose 1.8% to a record $221.2bln.

Goods exports rose 5.1% to $116.7bln, led by increases in industrial supplies and materials ($2.8bln), capital goods ($1.2bln), foods, feeds, and beverages ($853mln), consumer goods ($722mln) and automotive vehicles, parts, and engines ($576mln).

Goods imports were up 2% to $186.7bln led by a $5.6bln increase in industrial supplies and materials. However, there were declines in capital goods (-$1.4bln) as well as consumer goods (-$576mln).

Overall, the year-to-date trade balance showed a $351.4bln deficit in June, less than the $358.4bln recorded over the same period last year. The YTD petroleum goods deficit totaled $201.6bln, significantly higher than the $132.5bln in Jun-07. However, the YTD non-petroleum goods deficit decreased to $213.1bln from $264bln at the same time last year.

The trade deficit with China was $21.4bln in June, up from $21bln in May. The Canadian trade deficit was $7.2bln after $5.4bln prior, while the OPEC deficit was a record $18.1bln, up from $17.9bln in May. This reflected June crude prices that averaged a record $117.13/bbl, according to the Bureau of Economic Analysis.