Trade Deficit a 43 Basis Point Hit to 4th Quarter GDP Despite A 5% Drop in November

Our trade deficit fell by 5.0% November, after rising by a revised 5.0% in October, as the net value of both our exports and imports decreased.  The Census report on our international trade in goods and services for November indicated that our seasonally adjusted goods and services trade deficit fell by $2.2 billion to $42.4 billion in November from a October deficit which was revised from $43.9 billion to $44.6 billion.  The value of our November exports fell by $1.6 billion to $182.2 billion on a $1.4 billion decrease to $122.2 billion in our exports of goods and a $0.1 billion decrease to $60.0 billion in our exports of services, while our imports fell $3.8 billion to $224.6 billion on a $3.7 billion decrease to $183.5 billion in our imports of goods and a $0.1 billion decrease to $41.1 billion in our imports of services.   Export prices averaged 0.6% lower in November, so the real growth in exports was greater than the nominal dollar value by that percentage, while import prices were 0.4% lower, similarly incrementally increasing growth in real imports from the value shown here...

The decrease in our November goods exports resulted from modestly lower exports of industrial supplies, consumer goods and other goods not categorized by end use.  Referencing the Full Release and Tables for October (pdf), in Exhibit 7 we find that our exports of industrial supplies and materials fell by $677 million to $32,886 million on a $457 million drop in our exports of non-monetary gold, a $443 million decrease in our exports of fuel oil, a $272 million decrease in our exports of crude oil and a $100 million decrease in our exports of coal, which were only partially offset by a $457 million increase in our exports of other petroleum products. Our exports of consumer goods fell by $644 million to $15,882 million on decreases of $264 million in our exports of cell phones and similar goods, $190 million in our exports of artworks and antiques and $174 million in our exports of pharmaceuticals.  In addition, our exports of goods not categorized by end use fell by $733 million to $5,065 million, and our exports of capital goods fell by $2 million to $44,398 million as an $829 million increase in our exports of civilian aircraft and a $383 million increase in our exports of industrial engines were offset by a $537 million decrease in our exports of telecommunications equipment, a $242 decrease in drilling and other oilfield equipment, a $125 million decrease in our exports of medical equipment and a $111 million decrease in our exports of industrial machines not otherwise listed.  On the other hand, our exports of automotive vehicles, parts and engines rose by $85 million to $12,868 million, and our exports of foods, feeds and beverages rose by $33 million to $10,247 million as a $197 increase in our wheat exports and modest increases in our exports of other foods and agricultural products was offset by a $360 million drop in our exports of soybeans.

Exhibit 8 in the Full Release and Tables gives us seasonally adjusted details on our imports and shows that a $2,954 drop to $48,810 million in our imports of consumer goods was largely responsible for the November drop in imports, as our imports of cellphones fell by $1,781 million, our imports of pharmaceutical preparations fell by $586 million, our imports of TVs and video equipment fell by $428 million, our imports of toys, games and sporting goods fell by $246 million, our imports of gem diamonds fell by $165 million, and our imports of household appliances fell by $131 million.. The value of our imports of capital goods also decreased, falling by $597 million to $49,319 million, as our imports of computers fell $325 million, our imports of industrial engines fell $152 million, our imports of civilian aircraft fell $126 million, and our imports of industrial machines not separately itemized fell $112 million, which were only partially offset by a $287 million increase in our imports of semiconductors.  Imports of industrial supplies and materials also fell, by $339 million to $36,139 million, as our imports of nonmonetary gold fell $277 million, our imports of "other" petroleum products fell $265 million, our imports of iron and steel mill products fell $235 million, our imports of other steel making materials fell $157 million, our imports of fuel oil fell $150 million, and our imports of natural gas fell $128 million, all offsetting a $1031 million increase in our imports of crude oil.  On the other hand, our imports of foods, feeds and beverages rose $101 million to $10,413 million as increases of $169 million in our imports of fruits and frozen juices and $128 million in our imports of fish and shellfish were only partially offset by a $151 million decrease in our imports of meat products, and our imports of automotive vehicles, parts and engines rose by $8 million to $29,145 million, and our imports of goods not categorized by end use rose by $314 to $7,819 million..

To assess the impact of October and November trade on 4th quarter growth figures, we must first adjust the value of October and November imports and exports for inflation and then compare those figures to the similarly adjusted 3rd quarter figures.  Normally, that would be done on an item by item basis using the prices changes for those import and export items that we'd find in the import-export price index published earlier by the BLS.  However, exhibit 10 in the pdf for this report gives us monthly goods trade figures by end use category and in total that are already adjusted to chained 2009 dollars, the same inflation adjustment used by the BEA to compute trade figures for GDP.  Although these figures are not annualized like the GDP figures would be, our interest is not in the absolute chained dollar numbers that would appear in the GDP report, but rather the change in exports and imports from the 3rd to the 4th quarter, which we can arrive at by averaging the monthly figures in the 3rd quarter and comparing those to the average of monthly figures from the 4th quarter.  Thus, computing 1- ((((119,519 + 118,178)/2)/ ((121,126 + 119,242 +122,628) / 3)) ^ 4 = 0.0692, we find that 4th quarter real exports are running at a 6.92% annual rate below those of the 3rd quarter.  Extrapolating that percentage change against 3rd quarter goods exports as carried in the latest GDP report, we find that a 6.9% decrease in exports would subtract 0.61 percentage points from 4th quarter GDP growth.. In a similar manner, we find that our 3rd quarter real imports averaged 179,814 million monthly in chained 2009 dollars, while inflation adjusted October and November imports averaged 179,167 million in that same chained dollar quantity index.  That would mean that so far in the 4th quarter, our real imports have decreased at a 1.43% annual rate over those of the 3rd quarter.  Since imports subtract from GDP because they represent that portion of our consumption or investment that occurred during the quarter that was not produced domestically, lower imports would add to GDP, in this case by 0.19 percentage points.  Hhence, the combined effect of greater deficit despite a decrease in trade so far in the 4th quarter would subtract 0.43 percentage points from the ultimate 4th quarter GDP growth tally...

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