The 18% Jump in Our October Trade Deficit Portends a Big Hit to Q4 GDP

Our trade deficit rose by 17.8% in October as the value of our exports decreased and the value of our imports increased.  The Census report on our international trade in goods and services for October indicated that our seasonally adjusted goods and services trade deficit rose by more than $6.4 billion to $42.6 billion in October from a revised September deficit of $36.2 billion. The value of our October exports fell by $3.4 billion to $186.4 billion on a $3.5 billion decrease to $123.1 billion in our exports of goods and a $0.1 billion increase to $63.3 billion in our exports of services, while our imports rose $3.0 billion to $229.0 billion on a $2.8 billion increase to $186.5 billion in our imports of goods and a $0.2 billion increase to $42.4 billion in our imports of services.   Export prices were on average 0.2% higher in October, so the relative real decrease in October exports would be greater than the nominal decrease by that percentage, while import prices were 0.5% higher, meaning real imports were smaller than the nominal dollar values reported here by that percentage.

The drop in our October exports of goods resulted from lower exports of foods, feeds and beverages, industrial supplies and materials, and consumer goods.  Referencing the Full Release and Tables for October (pdf), in Exhibit 7 we find that our exports of foods, feeds and beverages fell by $1404 million to $11,250 million on a $984 million decrease in our exports soybeans and a $451 million decrease in our exports of corn.  Our exports of industrial supplies and materials fell by $1040 million to $33,703 million on a $495 million decrease in our exports of nonmonetary gold, a $450 million decrease in our exports of fuel oil, a $314 million decrease in our exports of aluminum, a $274 million decrease in our exports of organic chemicals, and a $260 million decrease in our exports of crude oil, which were partially offset by a $306 million increase in our exports of natural gas liquids and a $254 million increase in our exports of other petroleum products.  In addition, our exports of consumer goods fell by $902 million to $15,921 million on a $956 million decrease in our exports of artwork and antiques, and our exports of automotive vehicles, parts, and engines fell by $35 million to $12,413 million as decreased exports of trucks, buses, and special purpose vehicles were mostly offset by increased exports of bodies and chassis for passenger cars.  Slightly offsetting the decreases in those export categories, our exports of capital goods rose by $37 million to $43,717 million and our exports of other goods not categorized by end use rose by $138 million to $5,887 million...

Exhibit 8 in the Full Release and Tables gives us seasonally adjusted details on our goods imports and shows that higher imports of consumer goods and capital goods were responsible for the $2.8 billion increase in our goods imports, even as our imports of passenger cars decreased.  Our imports of consumer goods rose by $2,374 million to $49,556 million on a $671 million increase in our imports of pharmaceuticals, a $373 million increase in our imports of cellphones, and a $331 million increase in our imports of apparel and fabric household goods, other than those made of wool or cotton.  At the same time, our imports of capital goods rose by $1,067 million to $49,552 million on a $581 million increase in our imports of computer accessories, and a $319 million increase in our imports of telecommunications equipment.  In addition, our imports of foods, feeds, and beverages rose by $23 million to $10,932 million and our imports of other goods not categorized by end use fell by $247 million to $7,829 million.  Partially offsetting those increases, our imports of automotive vehicles, parts and engines fell by $667 million to $29,175 million on a $1,222 million drop in our imports of of new and used passenger cars, even as our imports of trucks, buses, and special purpose vehicles rose by $466 million, and our imports of industrial supplies and materials fell by $340 million to $37,737 million as our imports of organic chemicals fell by $595 million and our imports of nonmonetary gold fell by $485 million while our imports of crude oil rose by $217 million.

To gauge the impact of October trade on 4th quarter GDP growth figures, we use exhibit 10 in the pdf for this report, which gives us monthly goods trade figures by end use category and in total, already adjusted in chained 2009 dollars, the same inflation adjustment used by the BEA to compute trade figures for GDP, albeit they are not annualized here.  From that table, we can estimate that 3rd quarter real exports of goods averaged 122.746.7 million monthly in 2009 dollars, while inflation adjusted October exports were at 120,548 million in that same 2009 dollar quantity index representation.  Annualizing the change between the two figures, we find that October's real exports of goods are running at a 7.0% annual rate below those of the 3rd quarter, or at a pace that would subtract about 0.56 percentage points from 4th quarter GDP if continued through November and December.   In a similar manner, we find that our 3rd quarter real imports of goods averaged 179,347.3 million monthly in chained 2009 dollars, while inflation adjusted October goods imports were at 180,896 million.  That would indicate that so far in the 4th quarter, we have seen an increase in our real imports at annual rate of 3.5% from those of the 3rd quarter.  Since imports subtract from GDP because they represent the portion of consumption or investment that occurred during the quarter that was not produced domestically, their increase at a 3.5% rate would subtract another 0.40 percentage points from 4th quarter GDP.  Hence, if the October trade deficit is maintained at the same level throughout the 4th quarter, our deteriorating balance of trade in goods would subtract about 0.96 percentage points from the growth of 4th quarter GDP.  Note that we have not computed the impact of the less volatile change in services here because the Census does not provide inflation adjusted data on those, and we don't have easy access to all their price changes to do that computation ourselves.

 

Note: the above was excerpted from my weekly synopsis at Marketwatch 666.

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trade data, import prices

Yeah, supposedly it is been import prices keeping the real deficit at bay. Trump is claiming we have an annual $800 billion trade deficit, I'm assuming that's nominal and we should determine how much is China. .

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china trade

 Menzie Chinn at Econbrowser has an overview on our trade with China:
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rjs