Trade Deficit Falls to Five-Year Low as Oil Imports Collapse

Daily Forex Fundamentals | Written by Wachovia Corporation | Jan 13 09 15:02 GMT |

The trade deficit came out much smaller than expected, dropping to a five-year low in November. A collapse in the value of oil imports explains much of the decline. However, non-oil imports weakened sharply as well, reflecting weakness in the domestic economy. Meanwhile, foreign recessions are causing exports to decline. Collapse in Oil Imports Drives Trade Deficit Lower The trade deficit came out much smaller than expected, largely because the value of oil imports fell sharply. The collapse in the price of petroleum since July finally showed up in the nation's import bill. That said, non-oil imports were also off more than $10 billion, reflecting weakness in the domestic economy. Global Recession Pulling Exports Lower The trade deficit would have narrowed even further had exports not dropped $7.6 billion. Broad-based declines in exports reflect the effects of the global recession. Net exports have propped up real GDP growth over the past year or so. By our reckoning, however, net exports made very little contribution to growth in the fourth quarter. Wachovia Corporation http://www.wachovia.com Disclaimer: The information and opinions herein are for general information use only. Wachovia Corporation and its affiliates, including Wachovia Bank, N.A., do not guarantee their accuracy or completeness, nor does Wachovia Corporation or any of its affiliates, including Wachovia Bank, N.A., assume any liability for any loss that may result from the reliance by any person upon any such information or opinions. Such information and opinions are subject to change without notice, are for general information only and are not intended as an offer or solicitation with respect to the purchase or sales of any security or any foreign exchange transaction, or as personalized investment advice. Securities and foreign exchange transactions are not FDIC-insured, are not bank-guaranteed, and may lose value.