Tuesday, December 14, 2004

It's a belt buster!!
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 $98.1 billion and imports of $153.5 billion resulted in a goods and services deficit of $55.5 billion, compared with $50.9 billion in September, revised. October exports were $0.6 billion more than September exports of $97.5 billion. October imports were $5.1 billion more than September imports of $148.4 billion.
Wow! The consensus forecast was -$53.5bn, so a number almost 4% larger than that is a bit of a shocker. These numbers show precisely why a falling dollar is no automatic corrector of the US trade deficit. When prices rise because of a falling dollar, Americans simply import more, save less, and swell the deficit.

In case you're wondering, -$55.5bn is indeed a new all-time record, beating the old record of -$55.3bn standing since all of four months ago. The last five months have seen deficits of over $50bn, and the eleven largest monthly deficits have occurred in the last eleven months.

You can hardly blame high oil prices alone for this continuing rout. The petroleum balance did plunge down in October to -$15.8bn, and the petroleum deficit for the year is 31.4% higher than in 2003. That being said, the non-petroleum goods balance in October fell as well, to -$42.6bn, it's second largest figure ever. So far in 2004 the non-petroleum goods balance is -$398.0bn, 16% larger than at this point in 2003 when it was a "mere" -$342.2bn. The US is simply flat out importing too many goods of all sorts, shapes and sizes.

To make matters even worse, the US services surplus is shrinking. The October figure of +$4.2bn was a welcome increase over September and the third highest surplus of the year. However, the first ten months of 2004 has tallied a services surplus 3.6% smaller than this point in 2003.

Here is the 2004 trade balance breakdown thus far:
Services . . . . . . . . . . . . . . . . . +$40.3bn
Foods, feeds and beverages . . -$5.0bn
Capital goods . . . . . . . . . . . . . -$7.4bn
Other goods . . . . . . . . . . . . . . -$10.6bn
Automotive vehicles, etc. . . . . -$115.5bn
Industrial supplies . . . . . . . . . -$168.6bn
Consumer goods . . . . . . . . . . . -$223.1bn
Thus far the overall trade deficit is 21% larger than in 2003 and 48% larger than in 2002. "Insatiable" doesn't even begin to describe the United States' gaping import maw.

But let's end on a happy note for once. The US trade deficit for September was revised upwards by $634 million, so instead of -$51.6bn, it turns out we were only in the hole -$50.9bn. In all honesty, that's the only bright spot I could find.

Oh, and Christmas is saved!


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