US: Imports dropped more than exports in October – Wells Fargo

Analysts at Wells Fargo point out the trade deficit narrowed as imports declined faster than exports. They noted exports fell for the second straight month, and imports for the fourth time in the past five months. 

Key Quotes: 

“Exports from the U.S. economy to our trading partners peaked in May 2018, just before the steel and aluminum tariffs fully went into effect in June of that year. The U.S. economy exports $6.2 billion less today, a decline of 2.9%.”

“A notable silver lining on the export side of the ledger is that service exports, which tend to be less vulnerable to the trade war, rose to $71.1 billion in October, just spitting distance from the all-time high. Service exports comprise about a third of overall exports.”

“Imports into the United States also peaked last year. From the peak in October 2018 to the current reported level, imports are down $12.5 billion or 4.7%. Roughly four fifths of all imports are goods, and that is where all of the decline has taken place; service imports actually hit a record high in this month’s report.”

“Net exports have been a drag on GDP growth in four of the past five quarters.”

“We will likely revise our forecast in such a way that trade is a modest boost to headline GDP growth in the fourth quarter. But shrinking the trade deficit by cutting imports even faster than you cut exports is obviously not a sustainable long-term path to drive growth for any economy. We are not expecting a swift resolution to the trade war, but we do not expect 2020 to match 2019 in terms of the pace of escalation.”