by Bill McBride on 9/12/2006 10:36:00 AM
Tuesday, September 12, 2006
Update: Dr. Setser on trade deficit: Not quite so bright after all
The trade deficit (ex-oil) was thought to be on a downward trajectory.Original Post:
But after today’s data, that argument may need to be reconsidered.
My bottom line: reducing the trade deficit is going to be – barring a big fall in the price of oil – something of a slog. Import growth has to slow. And I suspect that global growth won’t be quite as strong as it has been, making it hard to sustain the very strong export growth the US has enjoyed recently.
The Census Bureau announced the U.S. trade deficit for July was $68.0 Billion. From MarketWatch: Oil imports lead to record trade gap in July
Higher prices for imported oil pushed the U.S. trade gap of goods and services to a new record in July, a government report showed Tuesday.
The nation's trade deficit widened by 5% in July to $68 billion, the Commerce Department said. This beats the previous record of $66.6 billion set last October. Read full government report.
The U.S. imported $20.8 billion worth of crude oil in July, the highest amount on record. The import average price per barrel of crude oil was a record $64.84 in the month.
Click on graph for larger image.
It appears the trade deficit, excluding petroleum, might have stabilized (red). This might indicate a slowing U.S. economy and is consistent with a slowdown in the U.S. housing market.
The increase in petroleum prices was expected for July. However the decrease in exports was unexpected:
Meanwhile, exports of goods alone fell 1.5% in July to $73.4 billion. The drop was led by capital goods.Still July is the second best month of goods exports ever, and exports of goods are up 14% YTD through July compared to 2005. As the U.S. economy slows, foreign demand for U.S. goods is important for global rebalancing.
Posted by Bill McBride on 9/12/2006 10:36:00 AM