Friday, November 13, 2009

Trade Deficit - Affects on Energy and Currencies - 11.13.09

Trade Deficit

The U.S. international trade deficit in September widened significantly on higher oil imports. But the good news is that the freeze up in global trade appears to be thawing as U.S. export rose significantly. The overall U.S. trade deficit widened to $36.5 billion from a revised $30.7 billion worth of red ink in August. The shortfall was worse than the consensus projection for a $32.5 gap. Exports rose 2.9 percent while imports jumped 5.8 percent. The worsening of the trade deficit was led by a wider petroleum shortfall which came in at $20.5 billion compared to $16.6 billion the previous month. The nonpetroleum gap increased to $25.9 billion from $24.3 billion in August.

The widening in the petroleum deficit was due to both more barrels imported and higher prices. Physical barrels imported increased 6.6 percent in September after dropping 9.4 percent the month before. The price of imported oil rose to $68.17 per barrel from $64.75 in August.

Year-on-year, overall exports rose to minus 13.2 percent from minus 20.6 percent in August while imports improved to down 20.6 percent from minus 28.5 percent the previous month.

Overall, the rise in export appears to be more real than the boost in imports. Imports were up on higher oil prices, more barrels of oil, and more automotive imports from Canada. The gain in autos was to replenish auto inventories after cash-for-clunkers. Non-auto imports were up moderately. But manufacturers are benefitting from a lower dollar and healthy gains were seen in capital goods, autos, and consumer goods. While the headline numbers could weigh on the dollar, the details favor it. Equities should like the boost in exports. "

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