The U.S. merchandise trade balance improved in October 2009, with the bulk of the gain coming from manufactured goods trade. On the basis of the Commerce Department trade figures released today, the NAM has calculated that seasonally adjusted October trade deficit for manufactured goods was $24.8 billion, compared to $27.6 billion in September.
The $2.7 billion improvement in the manufactured goods balance accounted for 85 percent of the overall gain in the merchandise trade balance. October manufactured goods exports were 2.8 percent higher than in September, while imports fell marginally by 0.8 percent.
Exports were paced by the vital capital goods sector, which accounts for nearly half of U.S. manufactured goods exports. Capital goods exports rose 3.7 percent over September. The fact that 21 of the 32 capital goods categories showed growth indicates that the export recovery is broadening..
Trade fluctuates monthly, so not too much can be inferred from one-month changes. However, the October figures reinforce the recovering trend evident in that exports have risen in four of the last five months. October manufactured goods exports were 14 percent higher than their trough in May 2009. Though it is clear manufactured goods exports are recovering, there is still a long way to go, as October exports were still 20 percent below the July 2008 peak immediately before the collapse in world trade.
The recovering export growth, coupled with slower imports stemming from reduced U.S. consumer demand, have combined to slash the U.S. deficit in manufactured goods nearly in half. The deficit peaked at $46 billion in February 2007, compared to the October 2009 deficit of 24.8 billion.
Manufactured goods trade with free trade partners (NAFTA, CAFTA, and the other free trade agreements) continued to be in surplus in 2009, which through September was at an annual rate of $26 billion – up from the $21 billion surplus in 2008. As we often point out, contrary to the claims of trade critics, the United States has a [manufactured goods*] trade surplus with the countries with which the United States has concluded free trade agreements.
* Editor’s mistake, corrected 8:55 a.m. Friday. In editing copy, I omitted the important qualifier, “manufactured goods.” Thanks to commenter Karl for the catch.
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