October Trade Balance

The Census Bureau reported our trade deficit shrank a bit in October, narrowing to $40.6 billion from the revised September shortfall of $43 billion (originally shown as -$41.8 billion).

Seeing any improvement in our trade balance is good, and October’s results were the result of favorable factors. Exports from the U.S. rose 1.8% after slipping 0.1% in September. An improvement in services provided a big assist to this growth. On the other side of the ledger, imports rose a scant 0.4%, well below the 1.6% jump seen in the prior month. Further, it was a drop in non-petroleum goods which led this last factor.

As with most of our indicators, results don’t tend to be either unequivocally good or bad, colored instead by which crayon you choose to pull from the box. Rising exports argue for a recovery in other economies since their demand for our products appears to be increasing. In fact, deficits improved within a wide spectrum of our trading partners from China to the European Union; outright surpluses occurred with Hong Kong, Brazil, and Australia. On the other hand, slipping imports may be pointing to a slower pace of economic growth domestically, although that is by no means definitive or forecast.

For now, we will see the drop in our deficit as a positive, one which still points to an improving trend which began to develop almost two years ago. Another positive comes from the fact that such a change should help our nation’s GDP report when the ultimate tally for this year’s final quarter is released. (by J R)