Summary
Last Thursday (10/13), the Commerce Department reported an August trade deficit of 59.0 billion. This was up almost $1.1 billion from July's revised shortfall of just shy of $58.0 billion, and the August deficit is the third largest on record. The trade gap is the major source of the nation's immense and rapidly growing balance-of-payments deficit.
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The Numbers in General
* The August trade deficit (goods and services) came in at $59.03 billion, up almost $1.1 billion or about 1.8% from July's revised deficit of $57.96 billion (originally reported at minus $57.94 billion). The consensus forecast for August had contemplated a gap of something around the $59 billion actually reported.
* Last week's results did contain the early influence of Hurricane Katrina. For further information regarding how the Commerce Department plans on handling the impact of hurricanes Katrina and Rita, see the material appearing after the tables.
* February 2005's deficit of $60.42 billion remains the monthly record. June's shortfall of $59.49 billion holds down second place, with August's red ink of $59.03 billion not far behind.
* The trade deficit for 2005's first eight months exceeded last year's January-August red ink by a sizable $66.95 billion, or 16.9%.
2005 2004 Y/Y
-------- -------- -----
August $ 59.029 $ 54.195 8.9%
July $ 57.960 $ 51.331 12.9%
-------- -------- -----
Subtotal $116.989 $105.526 10.9%
-------- -------- -----
June $ 59.493 $ 54.894 8.4%
May $ 56.109 $ 48.742 15.1%
April $ 57.724 $ 48.406 19.2%
-------- -------- -----
2nd Quart. $173.326 $152.042 14.0%
-------- -------- -----
March $ 54.055 $ 46.966 15.1%
February $ 60.422 $ 45.834 31.8%
January $ 58.575 $ 46.053 27.2%
-------- -------- -----
1st Quart. $173.052 $138.853 24.6%
-------- -------- -----
Year to Date $463.367 $396.421 16.9%
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* August's trade deficit was the result of imports totaling $167.21 billion, and exports totaling $108.18 billion. These figures compared with respective revised import/export figures for July of $164.32 billion and $106.36 billion. Thus, in comparing August to July, imports rose $2.89 billion, or 1.8%; exports rose $1.86 billion, or about 1.7%.
* An increase in the cost of crude oil imports contributed about $1.86 billion (not seasonally adjusted) to August imports, which rose to $167.21 billion (seasonally adjusted).
* The net export result is one of six major components of gross domestic product. The deficit's July-August monthly average of $58.49 billion was a bit higher than the second quarter's monthly average of $57.78 billion. This suggests that trade could represent an incremental drag on third-quarter GDP -- "drag" because it is a deficit, therefore, a subtraction from GDP.
(NOTE: The first or "advance" estimate of third-quarter gross domestic product is scheduled for release on 10/28.)
The Crude Oil Data
* As the table below indicates, the value of August crude oil imports totaled $17.16 billion. This was a record and $1.86 billion more than July's $15.30 billion. The increase was the net result of a 4.4% advance in import volume, and a 7.4% rise in price ($52.65 per barrel in August, versus $49.03 per barrel in July).
* The monthly record for import volume was 344.7 million barrels, occurring in June of 2004.
* Although the cost of imported crude oil is different than the price of West Texas intermediate crude, which is the US benchmark grade, respective price trends certainly follow each other. The average of the WTIC August 1st and September 1st spot prices was $65.27 per barrel, versus the $52.65 per barrel cost assigned to imported crude oil in the August trade report. The current spot price of WTIC remains well above $60 per barrel, indicating higher prices for imported crude over at least another trade report or two.
* Crude oil imports were equal to 10.3% of total imports in August, up from 9.3% in July. In August, crude imports were equal to 12.2% of goods-only imports, which were reported at $140.5 billion.
(NOTE: The above calculations take license with mixing seasonally adjusted and seasonally unadjusted data. For the purpose at hand, the distortion in not significant.)
* During 2005's first eight months, crude oil imports totaled 2.544 billion barrels, valued at $110.6 billion. (This was equal to about 8.5% of total imports. Of goods-only imports for this eight-month period [$1088.8 billion], crude imports equaled 10.2%.)
* By comparison, during 2004's first eight months, crude oil imports totaled 2.561 billion barrels, slightly above 2005's volume. However, owing to increasing prices, 2005's eight-month cost exceeded 2004's by a very substantial $28.3 billion, or 34.5%.
* For all of 2004, crude oil imports totaled $131.7 billion, about 7.5% of total imports. Of goods-only imports ($1472.9 billion) for the twelve-month period, crude imports equaled 8.9%. (Again, these calculations mix seasonally adjusted and seasonally unadjusted data).
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TOTAL U.S. IMPORTS AND CRUDE OIL IMPORTS*
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Crude Oil Imports**
Total -----------------------
Imports# Barrels Value Avg. Crude/
Year/ -------- -------------- Price Total
Month (Amounts in Billions) Per Bbl. (%)
-----------------------------------------------
2005
Aug. $ 167.205 0.326 $ 17.155 $52.65 10.3
July 164.318 0.312 15.298 49.03 9.3
June 165.303 0.328 14.578 44.40 8.8
May 161.841 0.319 13.726 43.08 8.5
Apr. 163.467 0.314 14.045 44.76 8.6
Mar. 156.875 0.326 13.410 41.14 8.5
Feb. 161.828 0.297 10.942 36.85 6.8
Jan. 160.795 0.323 11.410 35.55 7.1
-----------------------------------------------
2005
S/T $1301.632 2.545 $110.564 $43.44 8.5
===============================================
2004
Dec. $ 156.393 0.321 $ 11.689 $36.46 7.5
Nov. 157.618 0.330 13.577 41.19 8.6
Oct. 154.098 0.313 13.107 41.84 8.5
Sep. 149.607 0.297 11.143 37.52 7.5
Aug. 150.705 0.334 12.196 36.54 8.1
July 147.523 0.324 10.818 33.38 7.3
June 149.143 0.345 11.631 33.74 7.8
May 145.141 0.318 10.535 33.14 7.3
Apr. 142.857 0.312 9.662 31.00 6.8
Mar. 142.139 0.330 10.118 30.66 7.1
Feb. 138.223 0.288 8.414 29.17 6.1
Jan. 135.584 0.310 8.853 28.57 6.5
-----------------------------------------------
2004
Total $1769.031 3.822 $131.743 $34.47 7.5
===============================================
2003 $1517.011 3.676 $99.167 $26.98 6.5
1998 1098.363 3.243 37.252 11.49 3.4
1993 713.058 2.543 38.469 15.13 5.4
1988 545.715 1.888 25.844 13.69 4.7
1983 323.874 1.294 38.184 29.51 11.8
1978 208.191 2.392 32.140 13.43 15.4
1973 89.342 1.393 4.593 3.30 5.1
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*Source: US Department of Commerce. **Not
seasonally adjusted. #Goods and services,
seasonally adjusted. MEMO ITEM: Crude oil
to goods-only imports: 1973 = 6.5%, 2004
= 8.9%, August 2005 = 12.2%.
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What would the trade deficit look like if the United States neither imported nor exported any crude oil?
Employing the figures in the above tables (remembering there is the mixing of seasonally adjusted and unadjusted data), the absence of oil imports would have produced an August deficit of $41.8 billion, $17.2 billion or 29.2% lower than the reported $59.0 billion.
For 2005's first eight months, the deficit came in at $463.4 billion. With no US crude oil imports, the figure would have been $352.8 billion, or 23.9% less.
During 2004, zero oil imports would have lowered the year's deficit by $131.7 billion, or by about 21.3%.
Selected Venues in Which
the Deficit is Being Created
--------------------------------
U.S. TRADE DEFICIT BY SELECTED
COUNTRIES/REGIONS (Ranked in
Order of August Size. Amounts
in Billions of $s and Are
Not Seasonally Adjusted)
--------------------------------
2005 2005
Country/ --------------------
Region Aug. July
--------------------------------
China 18.468 17.651
OPEC 8.983 8.915
Canada 6.651 6.012
Japan 6.590 6.633
Germany 4.494 4.562
Mexico 4.220 3.520
Italy 2.065 2.005
Korea 1.302 0.955
UK 1.003 0.952
Taiwan 0.843 1.120
Russia 0.768 0.997
--------------------------------
---------------------------------------------------------
U.S. TRADE DEFICIT BY SELECTED COUNTRIES/REGIONS
(Ranked in Order of 2005 Size. Amounts Are in
Billions of $s and Are Not Seasonally Adjusted)
---------------------------------------------------------
2005 % Change
Country/ Through 2005 ---------
Region Aug.-a Annual-b 2004 2003 2004/2003
---------------------------------------------------------
China 126.212 189.318 161.938 124.068 30.5
OPEC 58.863 88.294 71.843 51.065 40.7
Japan 54.840 82.260 75.562 66.032 14.4
Canada 45.250 67.875 66.480 51.671 28.7
Germany 33.476 50.214 45.850 39.281 16.7
Mexico 32.215 48.322 45.067 40.648 10.9
Italy 13.342 20.013 17.413 14.854 17.2
Korea 10.743 16.114 19.756 13.157 50.2
Taiwan 7.703 11.554 12.879 14.152 -9.0
Russia 7.680 11.520 8.930 6.171 44.7
UK 6.497 9.745 10.274 8.967 14.6
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a = actual 2005 cumulative. b = annualized.
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Effects of the Gulf Hurricanes on Trade Data
The Commerce Department made the following comments last week, when it released the August trade data.
"The economic effects of hurricanes Katrina and Rita are reflected in the source data underlying the joint BEA/Census Bureau release, 'U.S. International Trade in Goods and Services.' However, source data providers generally cannot isolate those effects and BEA cannot determine the effects of the hurricanes on any aggregate in the release.
"The hurricanes caused a temporary loss of petroleum production and refining capacity and other disruptions that affected the value of oil and other commodities that are traded internationally by the United States. This will affect U.S. trade in goods beginning with data covering August 2005.
"The hurricanes also will increase insurance and reinsurance claims received from foreign insurance companies but, under the new methodology that BEA recently adopted, the impact on international trade in insurance services will be small.
"...On October 21, 2005 at 10 a.m. the Census Bureau will release preliminary September 2005 export and import data for districts in the Gulf Region affected by the hurricanes, three weeks earlier than the official September release. The report will...[contain] preliminary export and import totals for each of the ports in the Gulf region and aggregated industry data for five Customs Districts. This release will pertain solely to Census basis goods trade data involving districts in the region affected by hurricanes Katrina and Rita, and will not include any data on trade in services.
"...The Census Bureau requested, and the Office of Management and Budget (OMB) granted, an exception under Section 7 of OMB Statistical Policy Directive No. 3 on the Compilation, Release, and Evaluation of Principal Federal Economic Indicators to the previously approved schedule of release dates. The OMB exception, for a period not to exceed six months, was for the sole purpose of providing public release of preliminary monthly trade statistics for the Gulf region.
"The data will provide more timely trade statistics on export and import flows in this major international trade gateway. The statistics in this release will have several limitations, the most significant being the coverage of the preliminary data in relation to the final data. Analysis of Gulf Region export and import goods data indicates the value of preliminary data should be between 70 and 90 percent of the final value reported in the regular monthly trade report, with wider variations by district, port, and industry group.
"Preliminary data will be released for the next four months at 10 a.m. on the dates provided below. OMB, in consultation with the Census Bureau, will determine if an optional two-month extension is warranted."
Statistical Month Date Day
-------------------------------------------------
September 2005 10-21-05 Friday
October 2005 11-21-05 Monday
November 2005 12-20-05 Tuesday
December 2005 01-20-06 Friday
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