U.S. Exports Climb to New Highs
December 6, 2013
Senior Vice President City National Foreign Exchange Manager
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
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.
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