U.S. and Canadian Trends in Trade

March 11, 2010

The $37.3 billion U.S. trade deficit in January interrupted a rising trend seen in recent months.  The January gap was near to the average shortfall of $36.3 billion last quarter, worse than the mean monthly deficit last year of $31.6 billion but much narrower than the average 2008 gap of $58.0 billion per month.  Merchandise export growth of 19.5% between January 2009 and January 2010 easily surpassed import expansion of 13.7%.  However, if world economic growth continues to mend and if the U.S. remains among the fastest-expanding advanced economies, export and import growth will converge, and the trend in the U.S. trade balance will likely be adverse.

On a census basis, the merchandise trade deficit was almost identical in January to its value in January 2009.  The deficit with the Pacific Rim narrowed by $7.3 billion, but those with the Western Hemisphere and with OPEC widened by $3.8 billion and $3.1 billion.  The deficit versus Europe was a mere $0.3 billion greater than a year earlier.  The table below which breaks down the regional shares of the U.S. trade deficit in January 2005 and January 2010, expressed as percentages of the total U.S. gap, highlights the growing importance of China in the whole U.S. trade picture.

January W. Hemisphere Europe OPEC Pac Rim China
2005 23.0% 16.9% 10.7% 45.8% 27.1%
2010 19.6% 9.9% 16.5% 48.1% 42.2%


The Canadian trade balance, which got clobbered first by the loonie’s sharp rise and then by the Great Recession, continues to convalesce but has a long way to go.  It weakened from a deficit of CAD 1.11 billion in January 2009 to a monthly average gap of CAD 1.38 billion in 3Q09 but then improved to an average surplus of CAD 181 million per month last quarter and a surplus of CAD 799 million in January of this year.  In 2008, a surplus of $3.91 billion per month was seen.  Between August 2009 and January 2010, exports rose 13.3%, while imports went up 3.2%.  However, the improvement between December and January reflected a CAD 1.14 billion rise in the energy surplus, mitigated by a CAD 0.42 billion worsening of the trade deficit on all other commodities.  Total exports only increased 0.5% in January, the smallest monthly gain since August.

Canada also announced its first significant quarterly rise in capacity utilization since the first quarter of 2007.  Such improved to 70.9% in 4Q09 from 68.7% in 3Q09 but remains well below a peak of 84.9% in 4Q04.

Copyright Larry Greenberg 2010.  All rights reserved.  No secondary distribution without express permission.

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