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U.S. Exports Climb to New Highs

December 6, 2013

David Atkinson
Senior Vice President City National Foreign Exchange Manager

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This week we received some interesting news about international trade that poses some provocative questions as we move into 2014. The U.S. trade balance (released on Wednesday) is normally looked at with a passing glance by markets as the data is two months old. However, this report for October had a surprising number for exports that had everyone paying attention.

To many of us, the trade balance is just expected to be permanently negative, as the U.S. consumption machine imports more than it exports. That was true again in October – to the tune of a $40 billion gap – but both components of the balance rose to significant highs.

Imports rose to $233 billion – the highest level since March 2012. That number is seasonally adjusted to account for the inventory build-up ahead of the holiday season. But what was really interesting was what we saw in exports. Exports rose to nearly $193 billion – the largest number ever posted for U.S. exports. In particular, sales of U.S. goods to China, Canada and Mexico rose to their highest levels ever.

The significance of this lies partly in the timing. October was a rough month for the U.S. economy as we had the standoff in Washington, D.C., on the government shutdown and the debt ceiling debate. Even though much of the macro data from that time frame took a hit because of the government shutdown, the U.S. was selling more products to the rest of the world. Looking at that data in more detail reveals that the export gains were mostly in capital goods – particularly mining and oilfield equipment and industrial machines.

My View: This is unequivocally good news for the U.S. as well as the rest of the world. More purchases of such fixed assets that are critical to the beginning of the manufacturing process portend the potential for a stabilized and growing economy for the rest of the world. If this continues, the global economy could see a better year in 2014.

This report is for general information and education only and was compiled from data and sources believed to be reliable. City National Bank does not warrant that it is accurate or complete. Opinions expressed and estimates or projections given are those of the authors as of the date of the report with no obligation to update or notify of inaccuracy or change. This report is not a recommendation or an offer or solicitation to buy or sell any financial instrument discussed. It is not specific investment advice. Financial instruments discussed may not be suitable for the reader. Readers must make an independent investment decisions based on their own investment objectives and financial situations. Prices and financial instruments discussed are subject to change without notice. Instruments denominated in a foreign currency are subject to exchange rate and other risks. The Bank (and its clients or associated persons) may engage in transactions inconsistent with this report and may buy from or sell to clients or others the financial instruments discussed on a principal basis. Past performance is not an indication of future results. This report may not be reproduced, distributed or further published by any person without the written consent of City National Bank. Please cite source when quoting.

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