MW: Wider October trade gap tied to jump in oil imports
Deficit of $57.2 billion exceeds forecasts; new record for gap with China
WASHINGTON (MarketWatch) -- The weak U.S. economy pushed down exports and imports in October, but the nation's overall trade deficit rose as the volume of imported oil spiked, a government report showed Thursday.
The October trade gap widened 1.1% to $57.2 billion from $56.6 billion in September, the Commerce Department said. Read full government report.
The jump in the deficit surprised analysts. The consensus forecast among economists surveyed by MarketWatch had been for the deficit to narrow to $54.5 billion. See Economic Calendar.
In real terms, the goods deficit widened 10.3%. Behind the rise was a record increase in the quantity of imported crude oil.
Analysts said the trade data had little impact on the financial markets.
Government bond prices reacted to a 26-year high reached in initial jobless claims. Read Bond Report.
The stock market came off its lows but remained in negative territory, also keying on the data showing higher first-time and continuing claims for unemployment benefits. See Market Snapshot.
However, economists at Macroeconomic Advisors noted that the components of the trade report carry negative connotations for gross domestic product in the fourth quarter. As a result, they said that the economy would shrink at a 6.6% rate in the final three months of the year, worse than their previous estimate of a 5.9% contraction.
With global trade slowing in light of the severe downturn in economic activity in all major trading nations, economists anticipate that the U.S. trade gap will shrink over time.
October's jump in the trade deficit "merely delays the inevitable," wrote Ian Shepherdson, chief economist at High Frequency Economics.
Indeed, the deficit's three-month moving average has been declining steadily since mid-2008.
For the first 10 months of the year, the trade gap is $590.9 billion, compared with $582.8 billion over the same period last year. But the year-to-date deficit is below the pace in 2006, when the trade gap hit a record $753.3 billion.
Matter of degree
In October, exports fell 2.2% to $151.7 billion, while imports dropped 1.3% to $208.9 billion.
Exports of goods alone fell 3.4% in October to $104.8 billion, as all major subcategories of exports shrank. Exports of U.S. goods were the lowest since January.
A 58-day strike at Boeing Co. , settled in late October, didn't help matters. Exports of civilian aircraft fell a sharp 27.9% on the month.
Economists are clearly worried about the sharp downturn in exports. There had been hope that exports would constitute a bright spot in these grim economic times.
But exports are down at a 12.6% annualized rate in the three months to October compared to the previous three months, Shepherdson noted.
"The sudden plunge likely reflects both the collapse in global demand and the credit crunch, which is making it harder to get trade finance," he said.
Imports of goods alone fell 1.5% to $174.6 billion in October.
