September Trade Deficit Plummets but New Record Highs Set in China and Manufacturing Shortfalls

Alan Tonelson |

The U.S. goods and services trade deficit sank by more than 15 percent on month in September, but new monthly records were set by the gaps with China and in manufacturing – which generates an outsized share of the economy's high-wage employment and typically leads in productivity growth and innovation. China goods and high tech products imports rose to record monthly highs in September, too. Although the domestic energy production revolution helped drag the current-dollar petroleum deficit to a near-14 year low, the September figures revealed that the policy-influenced portion of U.S. trade flows has reduced growth during the current economic recovery by nearly 20 percent in real terms – or more than $400 billion.

Here are selected highlights of the latest monthly (September) trade balance figures released this morning by the Census Bureau:

>Although the combined U.S. goods and services trade deficit shrank in September from a downwardly adjusted $48.02 billion to $40.81 billion, the U.S. shortfalls in manufacturing ($74.69 billion) and in goods with China ($36.28 billion) set new monthly records. In addition, in current-dollar terms, the U.S. petroleum deficit sank to its lowest monthly level ($5.58 billion) since December, 2001.

>The total September trade deficit improved sequentially by 15.01 percent both because combined exports rose by 1.60 percent, from a downwardly adjusted $184.94 billion to $187.90 billion, and because combined imports dropped by 1.82 percent, from a downwardly adjusted $232.96 billion to $228.71 billion – the year's second-lowest total.

>Yet despite continuing claims of an imminent renaissance in the sector, the trade deficit in manufacturing hit a record $74.69 billion in September. That figure topped the previous all-time high of $73.58 billion, set in July, by 1.51 percent.

>October manufactures exports dipped on month by 0.26 percent – from $93.07 billion to $92.82 billion. Manufactures imports rose from $166.11 billion to $167.52 billion, or 0.85 percent.

>On a year-to-date basis, moreover, the manufacturing trade deficit this year is running 14.77 percent ahead of 2014's total of $734.44 billion, which itself set a new record. Manufacturing exports this year have fallen by 5.65 percent, but imports are up by two percent – making clear that the strong dollar effect undercutting U.S. manufacturing production and employment lately are being felt on both sides of the trade ledger.

>America's manufacturing-heavy trade with China turned in a similar performance in September. The bilateral merchandise deficit jumped by 9.53 percent over the August levels to $36.28 billion – another all-time high. The previous record, $35.61 billion, was set the previous September.

>U.S. goods exports to China rose by 2.73 on month, from $9.17 billion to $9.42 billion – even though China's economy continues to grow strongly by international standards. But the much greater amount of goods imports increased faster, by 3.58 percent, from $44.12 billion to a new record $45.70 billion. (The previous monthly high was $45.16 billion, set in October, 2014.)

>Year to date, the U.S. merchandise deficit with China is running 8.42 percent ahead of last year's rate, totalling $273.57 billion versus $252.32 billion. As a result, it's virtually certain to surpass 2014's record full-year bilateral merchandise trade deficit of $343.08 billion.

>Year to date, U.S. goods exports to China are down from $86.76 billion to $83.99 billion (or 3.19 percent). U.S. goods imports from China, however, are up 5.45 percent - from $339.08 billion to $357.57 billion.

>America's longstanding current-dollar petroleum trade deficit not only represented the second lowest figure since December, 2001 ($5.58 billion versus $5.50 billion). It was also 19.71 percent lower than August's $6.95 billion.

>In another area of concern, the longstanding U.S. trade deficit in high tech goods surged by nearly 50 percent on month in September, to $10.82 billion. These trade flows tend to be volatile, but thgap was the third highest on record, and was mainly fueled by an all-time high monthly high import total of $40.22 billion.

>The September figures also confirmed that the nation's trade performance – and especially the trade flows heavily influenced by trade agreements and similar policy decisions – have drained major amounts of valuable growth from America's already sluggish economic recovery.

>The inflation-adjusted goods deficit for the third quarter of 2015 – which strips out trade in oil and services that are not significantly affected by trade policies – has now come in at a record $166.75 billion on an annualized basis. As a result, its increase – from $65.95 billion in the second quarter of 2009, when the last recession ended – has slowed the economy's cumulative growth by $403.21 billion, or 19.78 percent. Worse, virtually all of this lost growth has come in the private sector.

>The September trade figures brought the combined pre-inflation U.S. global trade deficit to $394.92 billion this year – 3.93 greater than the $380.00 billion for the first nine months of 2014.

>U.S. exports year-to-date are down 3.78 percent, but the much greater amount of imports is down only 2.41 percent. .

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to:


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