Did the USA Trade Balance Deficit Increase in December 2010?

With the escalating cost of crude oil, it should come as no surprise that the trade balance should have grown in December 2010.  But depending how you look at it, in some respects it is also trending lower.  Consider,

  • exports are growing at a record pace – they are at a all time high not only for December – but all time;
  • imports are weak, and the value would have fallen MoM  if not for the crude oil price increase.  However – in a normally weak month for imports – imports too hit an all-time high for December; and,
  • the overall trade balance for Decembers is well within the historical range – and would have been below the historical range had oil prices not rose.

Crude oil prices were not the only thing rising – the consumption of diesel rose the last month of 2010 to all time December highs (analysis here).    The trade press release in part:

The U.S. Census Bureau and the U.S. Bureau of Economic Analysis, through the Department of Commerce, announced today that total December exports of $163.0 billion and imports of $203.5 billion resulted in a goods and services deficit of $40.6 billion, up from $38.3 billion in November, revised. December exports were $2.8 billion more than
November exports of $160.1 billion. December imports were $5.1 billion more than November imports of $198.5 billion.

In December, the goods deficit increased $2.3 billion from November to $53.6 billion, and the services surplus was virtually unchanged at $13.0 billion. Exports of goods increased $2.8 billion to $116.6 billion, and imports of goods increased $5.1 billion to $170.1 billion. Exports of services were virtually unchanged at $46.4 billion, and imports of services were virtually unchanged at $33.4 billion.

The goods and services deficit increased $3.5 billion from December 2009 to December 2010. Exports were up $19.6 billion, or 13.7 percent, and imports were up $23.1 billion, or
12.8 percent.

Econintersect evaluates the data based on unadjusted data.  The trade balance actually appears to be trending smaller YoY during the last 4 months – and not growing as suggested by the seasonally adjusted US Census data.

Imports are growing and at all time highs for December.  Without the surge in oil prices, this still would have been true.  The oil increase added $5 billion over November levels.

But it was the historically high exports which mitigated most of the damage of higher oil prices.  It is interesting that despite rising food commodity prices – this sector added little to the growth.  The growth came from manufactured goods across most sectors. Econintersect’s longer term hypothesis that going forward with rising costs for energy, we should look for a “less good” trade gap in the near term. This hypothesis was negated this month by the export surge.

Long term, there are so many dynamics in play that the crystal ball is too fogged to provide an answer.  Sometimes this process is like the game piece “8-Ball” from Tyco and the message window keeps showing things like “Can Not Be Determined” and “Better Not Tell You Now.”