US trade gap narrows as imports fall amid China conflict
"Shrinking the trade deficit by cutting imports even faster than you cut exports is obviously not a sustainable long-term path to drive growth for any economy", said Tim Quinlan, a senior economist at Wells Fargo Securities in Charlotte, North Carolina.
The US trade deficit in October unexpectedly fell to its lowest level in more than a year as Americans imported billions less in autos and consumer goods like toys and mobile phones, according to government data out Thursday. Modest falls were seen in all categories except capital goods.
USA exports of agriculture goods to China rose to $1.2 billion last month, the second highest level of exports since before the tariff fight began previous year.
Goods imports dropped as well, falling 2.1 percent, the same magnitude as September.
Economists said Thursday however that imports were likely to rise in the coming months as a hit from September's tariffs on Chinese merchandise recedes and shoppers resume buying.
Imports from China shrank in October after the USA raised tariffs. Cellphone imports dropped 4.2%, while imports of toys fell 10.1% and apparel decreased 9.2%. Congress has yet to ratify the revamped version he negotiated previous year with Mexico and Canada. -China tariff fight ignited in May of 2018. Weaker economic performance around the world has also led to softer demand for USA exports. Exports in October edged down to US$207.1 billion as foreign buyers took in fewer US-made aircraft engines and industrial supplies.
The goods trade gap with the European Union jumped 20% to $16.4 billion, with imports surging to a record high. "Service exports comprise about a third of overall exports".
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The narrower trade gap will make a positive contribution to fourth-quarter gross domestic product. The U.S. economy is capable of producing far more than the U.S. consumes.
"Paradoxically, although the net figure is likely to boost [fourth quarter] GDP, neither lower imports nor lower exports are signs of economic vitality, either here or overseas", said Joshua Shapiro, chief economist at Maria Fiorini Ramirez Inc., said in a note to clients. The effects of the General Motors strike clearly showed up in the report with both exports (- 2.9%) and imports (-3.3%) of motor vehicles/parts registering sizeable declines. It suggested trade could add to GDP growth in the fourth quarter after being a drag for two straight quarters. In a third report, the Labor Department said initial claims for state unemployment benefits dropped 10,000 to a seasonally adjusted 203,000 for the week ended November 30, the lowest level since mid-April. As of the end of October, the US has imported $382.1 billion of goods in 2019, compared with $447.2 in the first 10-months of 2018.
Figures on worldwide trade can be volatile from month to month.
Big picture: The U.S.is on track to record the biggest annual trade deficit in 11 years. US stocks were trading lower amid a lack of new developments in U.S.
"One of the reasons the fourth quarter is going to be weak, we believe, is probably a significant inventory adjustment, which might be as much as half a percent or more of GDP growth", Kaplan said in an interview with CNBC last week.
The company, the US arm of shipping equipment supplier China International Marine Containers Group Ltd., cut 62% of its employees earlier this year due to the slowdown, bringing its total staff to 140 in California and Virginia.
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