The US trade balance deficit narrowed by $14.3 billion in October, which is only the second time such a gain has occurred in data going back to the early 1990s, explained analysts at Wells Fargo. They add the narrowing was driven by the largest gain in exports since coming out of lockdown in mid-2020, a welcomed development after imports have largely outpaced exports over the past year and a half.
Key Quotes:
“U.S. exports surged 8.1% in October outpacing a more-modest 0.9% gain in imports. This pop in exports caused the trade balance to narrow by $14.3 billion, a gain outpaced only once during the financial crisis of 2008 in data going back to the early-1990s. This narrowing left the U.S. trade balance at its lowest deficit in six months.”
“Throughout the pandemic, imports have rebounded much faster than exports as U.S. domestic demand has outpaced many international economies. While the trade balance has widened sharply since the onset of COVID, trade flows have been highly volatile from month-to-month. Our best read is that today's narrowing in the trade deficit is likely more a story of monthly volatility rather than the start of a sustained narrowing in the deficit.”
“We still believe imports should cool off a bit as domestic demand transitions back to services, but the timeline of this eventual reprieve has grown more uncertain due to potential hiccups in the sector associated with the Omicron variant.”