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U. S. exports drop

Thursday, March 11th, 2010

Texas Border Business

The U.S. trade deficit contracted in January to -$37.3 billion from -$39.9 billion in the previous month due to a slip in both internal and external demand. After rising for eight consecutive months, exports dropped 0.3%, while imports declined 1.7%.

Nevertheless, both exports and imports continued to improve compared to a year ago with imports rising 15.1% yoy and exports climbing 11.9%. These upward trends indicate that January’s slip could be due to monthly volatility and that internal and external demand is still pointing to recovery.

The decline in imports reflected decreases in automotive vehicles and parts (-$1.5B), capital goods (-$1.1B) and consumer goods (-$0.9B). Imports of foods, feeds and beverages rose slightly by $0.1B, while industrial supplies and materials were essentially unchanged.

The slowdown in exports was led by capital goods (-$1.0B), followed by automotive vehicles and parts (-$0.5B), and foods, feeds and beverages (-$0.1B). Exports of industrial supplies and materials and consumer goods rose by $0.5B and $0.2B respectively.

Exports to China dropped 17.6% in January, but they have historically experienced large declines between December and January, so it is likely not indicative of a trend. China continues to drive external demand for U.S. goods with exports to the region 64.9% above those of a year ago. Other regions are also beginning to recover with exports to LATAM up 10.2% yoy, Mexico up 17.4% yoy, Canada up 16.6% yoy and EU up 5.7% yoy.

Bottom-line: January’s slip in global demand followed many months of growth, so it is not likely indicative of a change in trend. We continue to expect external demand to contribute to further expansion in industrial production and GDP growth in 1Q10.
Source: US Economic Research Department

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