International Trade Balance

International Trade Balance

December 5, 2017 – The International Trade Balance looks at the U.S. Economy’s transactions with trading partners around the world for goods, services, income, and financial claims on liabilities. It is the major indicator for foreign trade and has implications for the net exports portion of GDP. A positive trade balance represents more exports than imports while the opposite is true for a negative balance.

The trade deficit in October widened substantially to $48.7 billion, from September’s revised deficit of $44.9 billion (+1.4 billion revision). The deficit came in slightly below the consensus of $47.4 billion. Exports fell back 0.5% to $195.9 billion while imports surged 1.6% higher at $244.6 billion. For exports, capital goods, vehicles, and consumer goods all showed declines. Industrial supplies and services showed gains while capital goods declined. Industrial supplies and materials as well as the other goods category reported to largest increases on the imports side.

Similar to September, October’s trade deficit continued to widen. There are three main aspects in international trade that could lead to an increase in imports. One being foreign product prices are lower and it is cheaper for the U.S. to import goods. Another reason for an increase in imports could be the U.S. dollar is becoming stronger relative to the foreign currencies we trade with. Finally, it could be due to a higher domestic demand for goods and services so the U.S. is not exporting as many goods. For this international trade report resulting in high imports, it is likely that there was a surge in domestic demand for foreign goods. With the rapid expansion of devices that can order and reorder goods just by talking into it, online shopping has made obtaining foreign goods significantly more accessible.

International Trade Balance