Trade Deficit Shrinks to $30.7 Billion

by devteam October 9th, 2009 | Share

Exports improved to a new 2009 high in August, while imports shrank, leading the US trade deficit to unexpectedly shrink, the Commerce Department said Friday. 

The monthly deficit fell 3.6% to $30.7 billion. Economists had been expecting it to widen to $33.6 billion on account of rising oil prices. But while prices did gain $2.27 to $64.75 in the month, volume plummeted.

The advance in exports was rather slight at +0.2%, but it was the fourth consecutive gain. And with the dollar falling to a 14-month low yesterday, exports should continue to be healthy as the global economy stabilizes. 

Imports declined 0.6% overall, including a 5.7% decline in oil imports. A 59% drop in civilian aircraft orders was the biggest culprit, but spending was also lower on consumer goods, industrial supplies, and capital goods. Offsetting those declines was an advance in auto imports, which climbed to a 11-month high.

Some analysts read the drop in imports as a sign that US consumers aren’t ready to open their wallets just yet. Moreover, analysts from Nomura Global Economics said the outlook for exports is bleak too.

“Despite the improvement in the trade balance in July, the outlook for US net exports has recently turned darker, in our view. After adding an average of two percentage points to GDP growth in the first half of 2009, we expect net exports to generally subtract from growth for the remainder of this year and next,” they wrote after the report.

Looking ahead, the deficit is likely to deepen as American GDP picks up and the pace of imports is accelerated.

“With exports trending higher and imports remaining soft as households deleverage, the trade sector should support the recovery in the current and future quarters,” said Sal Guatieri from BMO Capital Markets. He added that trade will probably subtract one-quarter of a percentage point from GDP growth in Q3, which he expects at +3.8% annualized.

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About the Author


Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, is a PASBA member accountant located in Londonderry, New Hampshire.

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