| Consensus | Consensus Range | Actual | Previous | Revised | |
|---|---|---|---|---|---|
| Balance | $-59.1B | $-65.8B to $-52.8B | $-29.4B | $-52.8B | $-48.1B |
Highlights
The international trade balance in goods and services is a deficit of $29.4 billion in October after a deficit of $48.1 billion in September which is a downward revision from the prior month. This is well below the consensus for a deficit of $59.1 billion in the Econoday survey of forecasters. The trade balance for goods-only is a deficit of $59.1 billion in October, down 24.5 percent from September. The trade balance for services-only is a surplus of $29.8 billion in October, down 1.2 percent from September.
It seems probable that the government shutdown that last the month of October and which delayed processing of imports goods into the US caused the decline in imports. It is also probable that there will be a rebound in imports in November as goods start to move into the US. Imports of hard goods are more affected by the shutdown since some services can be done remotely.
Total exports of goods and services are up 2.6 percent in October from September to $302.0 billion. Exports of goods are up 3.8 percent in October from the prior month to $195.9 billion. Exports of goods are higher mostly from an increase of $10.2 billion in industrial supplies and materials which includes an increase of $6.8 billion in nonmonetary gold. Exports of services are up 0.7 percent in October from the prior month to $106.1 billion. Services exports are up with only small increases across major categories.
Total imports of goods and services are down 3.2 percent in October from September to $331.4 billion. Imports of goods are down 4.5 percent in October from the prior month to $255.0 billion. Imports of consumer goods are down $14.0 billion with pharmaceuticals down $14.3 billion. Industrial supplies imports are down $2.7 billion with imports of nonmonetary gold down $1.4 billion. Capital goods imports are up $6.8 billion with imports of computer accessories up $3.7 billion. Imports of services are up 1.4 percent in October from the prior month to $76.3 billion. Services include a $0.9 increase in travel.
It seems probable that the government shutdown that last the month of October and which delayed processing of imports goods into the US caused the decline in imports. It is also probable that there will be a rebound in imports in November as goods start to move into the US. Imports of hard goods are more affected by the shutdown since some services can be done remotely.
Total exports of goods and services are up 2.6 percent in October from September to $302.0 billion. Exports of goods are up 3.8 percent in October from the prior month to $195.9 billion. Exports of goods are higher mostly from an increase of $10.2 billion in industrial supplies and materials which includes an increase of $6.8 billion in nonmonetary gold. Exports of services are up 0.7 percent in October from the prior month to $106.1 billion. Services exports are up with only small increases across major categories.
Total imports of goods and services are down 3.2 percent in October from September to $331.4 billion. Imports of goods are down 4.5 percent in October from the prior month to $255.0 billion. Imports of consumer goods are down $14.0 billion with pharmaceuticals down $14.3 billion. Industrial supplies imports are down $2.7 billion with imports of nonmonetary gold down $1.4 billion. Capital goods imports are up $6.8 billion with imports of computer accessories up $3.7 billion. Imports of services are up 1.4 percent in October from the prior month to $76.3 billion. Services include a $0.9 increase in travel.
Market Consensus Before Announcement
The trade gap is expected at $59.1 billion.
Definition
Updating the goods portion of the advance report and offering initial data on services, this report provides complete information on cross-border trade. Merchandise trade is available by export, import and trade balance for six principal end-use commodity categories and for more than one hundred principal commodity groupings. Data are also available for 48 countries and 7 geographic regions. Detailed information is reported on oil and motor vehicle imports. Services trade is available by export, import and trade balance for seven principal end-use categories.
Description
Changes in the level of imports and exports, along with the difference between the two (the trade balance) are a valuable gauge of economic trends here and abroad. While these trade figures can directly impact all financial markets, they primarily affect the value of the dollar in the foreign exchange market.
Imports indicate demand for foreign goods and services here in the U.S. Exports show the demand for U.S. goods in countries overseas. The dollar can be particularly sensitive to changes in the chronic trade deficit run by the United States, since this trade imbalance creates greater demand for foreign currencies. The bond market is also sensitive to the risk of importing inflation. This report gives a breakdown of U.S. trade with major countries as well, so it can be instructive for investors who are interested in diversifying globally. For example, a trend of accelerating exports to a particular country might signal economic strength and investment opportunities in that country.
Importance
The international trade balance on goods and services is the major indicator for foreign trade. While the trade balance (deficit) is small relative to the size of the economy (although it has increased over the years), changes in the trade balance can be quite substantial relative to changes in economic output from one quarter to the next.
Interpretation
Market reaction to this report is complex. Typically, the smaller the trade deficit, the more bullish for the dollar. Also, stronger exports are bullish for corporate earnings and the stock market.
Both the level and changes in the level of international trade indicate relevant information about the trends in foreign trade. Like most economic indicators, the trade balance is subject to substantial monthly variability, especially when oil prices change. It is more appropriate to follow either three-month or 12-month moving averages of the monthly levels.
It is also useful to examine the trend growth rates for exports and imports separately because they can deviate significantly. Trends in export activity reflect both the competitive position of American industry and the strength of domestic and foreign economic activity. U.S. exports will grow when: 1) U.S. product prices are lower than foreign product prices; 2) the value of the dollar is relatively weaker than that of foreign currencies; 3) foreign economies are growing rapidly.
Imports will increase when: 1) foreign product prices are lower than prices of domestically-produced goods; 2) the value of the dollar is stronger than that of other currencies; 3) domestic demand for goods and services is robust.
The international trade report does show bilateral trade balances with our major trading partners. Since the value of the dollar versus various foreign currencies does not always move in tandem, we can see a narrower or wider trade deficit with different countries. In the 1980s and 1990s, the U.S. trade deficit with Japan often caused political problems. During the next 20 years the deficit with China began to grow rapidly and, like Japan, once again caused political problems. While American consumers benefit from weak imports, American workers often lose their jobs as these goods are no longer produced in the United States. Ideally, the United States would be exporting (high end) goods that other countries don't produce.
Imports indicate demand for foreign goods and services here in the U.S. Exports show the demand for U.S. goods in countries overseas. The dollar can be particularly sensitive to changes in the chronic trade deficit run by the United States, since this trade imbalance creates greater demand for foreign currencies. The bond market is also sensitive to the risk of importing inflation. This report gives a breakdown of U.S. trade with major countries as well, so it can be instructive for investors who are interested in diversifying globally. For example, a trend of accelerating exports to a particular country might signal economic strength and investment opportunities in that country.
Importance
The international trade balance on goods and services is the major indicator for foreign trade. While the trade balance (deficit) is small relative to the size of the economy (although it has increased over the years), changes in the trade balance can be quite substantial relative to changes in economic output from one quarter to the next.
Interpretation
Market reaction to this report is complex. Typically, the smaller the trade deficit, the more bullish for the dollar. Also, stronger exports are bullish for corporate earnings and the stock market.
Both the level and changes in the level of international trade indicate relevant information about the trends in foreign trade. Like most economic indicators, the trade balance is subject to substantial monthly variability, especially when oil prices change. It is more appropriate to follow either three-month or 12-month moving averages of the monthly levels.
It is also useful to examine the trend growth rates for exports and imports separately because they can deviate significantly. Trends in export activity reflect both the competitive position of American industry and the strength of domestic and foreign economic activity. U.S. exports will grow when: 1) U.S. product prices are lower than foreign product prices; 2) the value of the dollar is relatively weaker than that of foreign currencies; 3) foreign economies are growing rapidly.
Imports will increase when: 1) foreign product prices are lower than prices of domestically-produced goods; 2) the value of the dollar is stronger than that of other currencies; 3) domestic demand for goods and services is robust.
The international trade report does show bilateral trade balances with our major trading partners. Since the value of the dollar versus various foreign currencies does not always move in tandem, we can see a narrower or wider trade deficit with different countries. In the 1980s and 1990s, the U.S. trade deficit with Japan often caused political problems. During the next 20 years the deficit with China began to grow rapidly and, like Japan, once again caused political problems. While American consumers benefit from weak imports, American workers often lose their jobs as these goods are no longer produced in the United States. Ideally, the United States would be exporting (high end) goods that other countries don't produce.
