Thursday, October 14, 2010

Trade Imbalance Increases

Bloomberg details:

The trade deficit widened more than forecast in August as growing U.S. demand for foreign autos and capital equipment swamped gains in exports.

The gap grew 8.8 percent to $46.3 billion, exceeding the $44 billion median forecast of economists surveyed by Bloomberg News, Commerce Department figures showed today in Washington. Imports rose 2.1 percent, while exports increased 0.2 percent.

The result is that net exports will continue to be a drag on GDP, but the optimist would note that the most recent datapoint (August) was before the collapse in the US dollar, which should (all else equal) make U.S. goods / services more attractive (i.e. cheaper) to foreign businesses / consumers. The opposite point of view on this is that it will simply cause the imports we need (i.e. low cost consumer goods from China / petroleum) to be more expensive.

Source: Census

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