Better-Than-Forecast U.S. and Canadian Trade Figures in October

December 10, 2009

Canada and the United States do a huge amount a trade with one another, so their overall trade positions rarely improve together in the same month or, for that matter, worsen in tandem.  The United States is Canada’s largest export and import market.  Canada is the largest U.S. export market and the second largest origin of U.S. imports among national economies.

October was that rare month when both countries reported better trade numbers. The improvement in Canada’s case was very dramatic.  A surplus of C$ 428 million was registered following deficits of C$ 850 million in September and C$ 1.95 billion in August.  Exports climbed 3.4% on month with a volume increase of 2.6% on month.  Exports of industrial goods and materials soared 8.8%, and energy shipments increased 6.5%.  Imports fell 0.8%, with drops in industrial goods and materials, machinery and equipment, automotive goods, and other consumer goods.  The Canadian current account last quarter exerted a 5.3 percentage point drag on Canadian GDP growth last quarter, limiting such to a mere 0.4% annualized.  That was lower than Bank of Canada officials had expected.

The U.S. trade deficit narrowed 7.6% to $32.9 billion, which nonetheless exceeded the average deficit in the first nine months of 2009 by 9.4%.  The census-basis merchandise trade deficit over the first ten months of 2009 was 43.3% smaller than a year before.  OPEC accounted for three-eighths of the incremental deficit reduction, and the Western Hemisphere was responsible for another 32.5% of the drop during the ten months from a year before.  China, against whom about half the U.S. total deficit is incurred, accounted for slightly less than an eighth of the on-year drop. In the third quarter, net exports had made a 0.83 percentage point negative impact on the 2.8% U.S. growth rate, which otherwise would have surpassed 3.5%.  It was the biggest drag from net foreign demand in over three years.

U.S. jobless claims last week rose 17K but, at 474K, was on a par with the four-week average of 473.75k.  That mean score was in turn down from 520.5K per week in the prior four weeks to November 7 and 90K less than in the same period three months earlier (that is, the four weeks to September 12).  In the past, net jobs have tended increase when jobless claims run below 400K.

Copyright Larry Greenberg 2009.  All rights reserved.  No secondary distribution without express permission.

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