Trade Deficit Narrows

The Census Bureau is reporting that the US trade deficit fell by approximately 28% M-O-M in November; representing a $40.4b deficit (markedly better than the $50.1b estimate).

A majority of the decline can be attributed to a fall in the price of oil imports, although there was an overall widespread pull-back in the demand for most foreign goods (12.0% M-O-M decrease). It is likely that this downward pressure on oil prices will persist, and continue to be a significant factor in the trade balance, as global adverse economic conditions result in further decreases in demand, which have thus far outpaced a reactionary pull back in supply (as I previously argued this dynamic is likely to persist in the near term).

Accompanying the decrease in imports was a 5.0% M-O-M decrease in exports (long gone are the days of H12008 where strong exports provided a significant boost to GDP). We can certainly expect to see continued weakness in the demand for exports as all indicators point towards pro-longed economic weakness abroad accompanied by a continued easing of monetary policy resulting in further increases in the value of the USD.

Source: US Census Bureau