October 2019 Trade Deficit

America’s trade deficit shrank in October 2019 according to the Bureau of Economic Analysis.  The shortfall improved to $47.2 billion from the revised $51.1 billion (originally $52.5 billion) chasm in September.  While on the surface this indicator looked better, the cause of the improvement is not constructive as both sides of the trade ledger declined in the period. 

America exported $207.1 billion or 0.2 percent less than a month prior.  Of the $400 million in monthly consumption that disappeared, goods comprised all the loss and then some.  Foreign purchases of American made goods declined $700 million.  Setbacks were experienced in consumer goods including pharmaceutical preparations and gem diamonds.  Capital goods (business equipment), civilian aircraft engines, and automobiles were also lower.  Fortunately, industrial supplies offset some of these losses as did service exports.

America imported less as well.  Consumer goods were off $2.4 billion alone; apparel, cell phones, and toys all suffered declines.  Auto-related imports shrank as well, dropping $1.8 billion.  However, Americans increased their consumption of foreign services by $100 million. 

As you might imagine, China has played a substantial role in the waning import tally over the past year.  America’s trade deficit with the world’s second largest economy was $27.8 billion to start the final quarter of the year.  That’s a decline of $10.4 billion or 27.2 percent from a year earlier.  Imports are down 22.9 percent in that time, but American exports are only off 0.7 percent.

This indicator suggests America’s economy is not suffering as badly as China in this trade war.  We are a fortunate nation because our economy is diverse and largely self-contained.  Our ability to absorb the tumult is being tested, and it appears America has the capacity to absorb more uncertainty for now.