October Balance of Trade

The U.S. Census Bureau recently released our October trade balance.  While still in a deficit, October’s gap shrank to $38.7 billion from $44.6 billion in the prior month.  This is the second lowest trade deficit of the year; beat by only February when it was $34.8 billion. Our exports were the highest since August 2008, totaling $158.7 billion.

Exports were helped by the declining value of our dollar.  The calendar month of October was the weakest month for its value as measured against a broad basket of currencies this year.  The weakness of our trade balance with China improve by 8.3%.  We exported $2.14 billion more to them while importing $179 million less than in September.  Leading the increase of exports to all trading partners was industrial goods which increased by $2.6 billion.

The dollar has strengthened since October but is still lower than its recent high in June.  The gap in trade may be able to continue to shrink if developing markets continue to grow stronger and our currency remains relatively weaker as the global economy continues to strengthen.  This powerful combination will be good for reducing inventories.  As inventories are depleted, more will need to be created and jobs may come with them.