Further Deterioration of Trade Deficit in November Means A Bigger Hit to 4th Quarter GDP

Our trade deficit rose by 6.8% in November as the value of our imports increased while the value of our exports was somewhat lower. The Census report on our international trade in goods and services for November indicated that our seasonally adjusted goods and services trade deficit rose by $2.88 billion to $45.24 billion in November from a revised October deficit of $42.36 billion.  The value of our November exports fell by $0.4 billion to $185.8 billion on a $0.7 billion decrease to $122.4 billion in our exports of goods which was partially offset by a $0.3 billion increase to $63.5 billion in our exports of services, while our imports rose $2.4 billion to $231.1 billion on a $2.7 billion increase to $189.0 billion in our imports of goods which was slightly offset by a $0.3 billion decrease to $42.1 billion in our imports of services.  Export prices were on average 0.1% lower in November, so our real November exports would be greater than the nominal value by 0.1%, while import prices were 0.3% lower, meaning real imports were greater than the nominal dollar values reported here by that percentage....

The drop in our November exports of goods resulted from lower exports of capital goods and automotive vehicles, which were partially offset by increases in our exports of industrial supplies and consumer goods.  Referencing the Full Release and Tables for November (pdf), in Exhibit 7 we find that our exports of capital goods fell by $1,733 million to $41,936 million on a $1,256 million drop in our exports of civilian aircraft, a $285 million decrease in our exports of industrial engines, and a $207 million drop in our exports of engines for civilian aircraft, and our exports of automotive vehicles, parts, and engines fell by $300 million to $12,113 million on a $285 million decrease in our exports of trucks, buses, and special purpose vehicles.   In addition, our exports of foods, feeds and beverages fell by $195 million to $11,049 million on a $313 million decrease in our exports soybeans, and our exports of other goods not categorized by end use fell by $691 million to $5,172 million.  Offsetting the decreases in those export categories, our exports of industrial supplies and materials rose by $1,463 million to $35,176 million on a $362 million increase in our exports of fuel oil, a $339 million increase in our exports of nonmonetary gold, and a $206 million increase in our exports of other petroleum products, and our exports of consumer goods rose by $481 million to $16,401 million on a $297 million increase in our exports of pharmaceuticals.

Exhibit 8 in the Full Release and Tables gives us seasonally adjusted details on our goods imports and shows that higher imports of industrial supplies and materials accounted for the lions share of the November increase in our imports. Our imports of those industrial supplies and materials rose by $2,246 million to $39,870 million as our imports of crude oil rose by $914 million, our imports of nonmonetary gold rose by $258 million and our imports of bauxite and aluminum rose by $208 million.  In addition, our imports of foods, feeds, and beverages rose by $228 million to $11,163 million, our imports of automotive vehicles, parts and engines rose by $140 million to $29,272 million on a $248 million increase in our imports of parts and accessories which was offset by a $283 million decrease in our imports of trucks, buses, and special purpose vehicles, and our imports of other goods not categorized by end use rose by $130 million to $7,955 million.  Slightly offsetting those import increases, there were relatively small decreases in our imports of capital goods and consumer goods.   Our imports of capital goods fell by $131 million to $49,404 million on a $241 million decrease in our imports of computers and a $221 million decrease in our imports of computer accessories, which were partially offset by a $131 million increase in our imports of civilian aircraft.  Our imports of consumer goods fell by $85 million to $49,486 million on a $599 million decrease in our imports of artwork, antiques and other collectables, a $390 million decrease in our imports of gem diamonds, and a $209 million decrease in our imports of toys, games, and sporting goods which were mostly offset by a $292 million increase in our imports of pharmaceuticals and a $736 million increase in our imports of cellphones..

To gauge the impact of October and November goods trade on 4th quarter GDP growth figures, we use exhibit 10 in the full 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, even though 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 and November exports were at 120,470 million and 119,353 million respectively, in that same 2009 dollar quantity index representation.  Annualizing the change between the average of the two quarters, we find that the 4th quarter's real exports of goods are falling at a 8.9% annual rate from those of the 3rd quarter, or at a pace that would subtract about 0.67 percentage points from 4th quarter GDP if continued through December.  In a similar manner, we find that our 3rd quarter real imports averaged 179,347.3 million monthly in chained 2009 dollars, while inflation adjusted October and November imports were at 180,786 million and 182,935 million respectively.  That would indicate that so far in the 4th quarter, real imports have been growing at annual rate of more than 5.7% 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 5.7% rate would in turn subtract another 0.72 percentage points from 4th quarter GDP.   Hence, if our October and November trade deficit in goods is maintained at these levels throughout December, our worsening balance of trade in goods would subtract about 1.39 percentage points from the growth of 4th quarter GDP.

Finally, note that we have not computed the impact on GDP of the usually less volatile change in services here, mostly because the Census does not provide inflation adjusted data on those, and we don't have easy source of all their price changes.  With changes in services trade usually small compared to volatile goods trade, that’s not usually a concern, but note that our services surplus did show a significant improvement that could partially ameliorate the losses to growth seen in trade in goods.  To quickly estimate the magnitude of that offset, we’ll note that the 3rd quarter average of our nominal services surplus was $20,421 million, while our services surplus rose by $525 million to $21,387 million in November.  Thus our unadjusted services surplus is rising at rising at an unusual 14.5% annual rate so far in the 4th quarter.  If that were to be maintained throughout December, it would add about 0.17 percentage points of the trade goods losses back to 4th quarter GDP.

 

note: the above was excerpted from my weekly synopsis on Marketwatch 666

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import, export prices

I've attempted to calculate GDP impact with import, export prices and get garbage. I find the mystery and user error on my part is not resolved with reading and phone calls. If you see of anyone who can do this, who isn't being paid $$ with private issue reports, let's find out how they did it.

I've been shocked at how the trade deficit hasn't pulled too much off of GDP this entire year considering what we know about China trade and other nation's individual deficits. Oil has greatly positively impacted the situation, so the party over on import prices we would assume a return to negative land.

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difficult calculations

almost any data that the commerce department publishes is nearly impossible to figure accurately unless it's accompanied by inflation adjusted data...ive got lucky a few times doing retail with CPI, but for the most part i figure my numbers are plus or minus 10%...for instance, construction spending was also out this week, and the NIPA handbook specifies use of at least a dozen different price indexes, most of which are privately published...so i just estimate with the producer price index for final demand construction and hope for the best...with oil and other price volatile commodities in trade, you wouldnt want to use just one index, and figuring the real value of every line item would be next to impossible without the program the govt uses...i actually tried that a few times, years ago, before i found that all that was already done in Table 10 of the full pdf...

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rjs