U.S. Trade Deficit Contained by Plunging Price of OPEC Oil

December 29, 2015

The census-basis U.S. merchandise trade deficit of $614.2 billion accrued over the first ten months of 2015 was an insignificant $3.45 billion wider than the year-earlier shortfall.  However, that trivial change masks huge shifts in the distribution of deficit across foreign markets.  Trade with OPEC swung to a $4.35 billion surplus from a $47.8 billion deficit a year earlier.  Trade within the Western Hemisphere improved by $18.87 billion.  On the other hand, the deficit vis-a-vis the Pacific Basin increased by $41.74 billion, or 12.2%, and that with Europe went up by $13.49 billion.  The deficit against Africa expanded, too.  Total exports of goods fell 6.6% on year in January-October, while imports declined 3.7%.  A comparison of October only figures against a year earlier reveals larger declines in both exports and imports than seen in the 10-month totals.

Trade is a negative factor for the dollar.  As a percent of GDP, the U.S. and Japanese 2015 current accounts will be similar in size (about 2.5%) but opposite in sign — the U.S. runs a deficit while Japan has a surplus.  Euroland’s current account surplus is even larger in size than Japan’s.  A wider deficit in net real exports of goods and services last quarter compared to the third quarter of 2014 depressed on-year U.S. real GDP growth by 0.6 percentage points to 2.1% from a hypothetical 2.7%, which would have been the result if the deficit had not deteriorated in the interim.  Most of the improved nominal trade balance with OPEC involved changes in price rather than volume.

Copyright 2015, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.



Comments are closed.