Wednesday, January 12, 2005

I'm really starting to run out of superlatives to describe the US trade deficit. When you hit $60bn a month, and that in the midst of falling oil prices (WTI spot price avg.: $53.28/barrel in October, $48.47/barrel in November), you've flown right out of the damned thesaurus.
The U.S. Census Bureau and the U.S. Bureau of Economic Analysis, through the Department of Commerce, announced today that total November exports of $95.6 billion and imports of $155.8 billion resulted in a goods and services deficit of $60.3 billion, $4.3 billion more than the $56.0 billion in October, revised. November exports were $2.2 billion less than October exports of $97.8 billion. November imports were $2.0 billion more than October imports of $153.8 billion.
This report is ugly 1000 ways till Sunday. Where to begin? Even though the dollar fell steadily in November and had been falling since early October, US exports were actually down $2.2bn from October to their lowest level in five months. Goods exports really plummeted, -$2.6bn although the much smaller services export number did rise $0.4bn. Lest we be comforted by the robust US services sector, note that the US services surplus for Jan.-Nov. is $44bn -- down from $46.5bn in Jan.-Nov. 2003 and $56.4bn in 2002.

Imports, of course, raced further on, up $2.0bn for the month thanks to the country's unquenchable thirst for imported petroleum. Non-petroleum goods imports actually shrank in November, -$0.7bn, but petroleum raced up +$2.0bn. Again, these are seasonally adjusted figures and oil prices in November fell over 9%. The November data on oil imports in volume terms isn't out yet, but one has to assume that October's figure of 10.3 mbd was shattered.

Surprisingly, US monthly goods imports from OPEC shrank in November by $0.5bn. Of course, the US gets less than half of its oil imports from OPEC, so perhaps we shouldn't be all that surprised. Perhaps all that oil was coming from Canada, the country's #1 foreign petroleum source.

The 2004:IV trade deficit is thus far 12.3% larger than in 2004:III and 15.5% larger than in 2004:II. On the first 11 months of the year the overall US trade balance stands at -$561.3bn. Suddenly Brad Setser's estimate of -$606bn for the year seems conservative -- even downright prudish.

More wine! More women! More song! Eat and drink, for tomorrow we die.


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