As was previewed last week in the advance release of international trade data which showed a big drop in the US deficit, moments ago the BEA confirms as much, when it reported that in August the US trade deficit blew out from $41.8 billion to a whopping $48.3 billion, an increase of 15.6%, as a result of a $3.7 billion drop in exports, offset by a $2.8 billion increase in imports. The August deficit, driven in major part by the surge in the US deficit with China which shot out to a whopping $32.9 billion, was the worst monthly print since March, and the second worst trade data read going back to early 2012.
More details from the report:
The goods deficit increased $6.6 billion from July to $67.9 billion in August. The services surplus increased $0.1 billion from July to $19.6 billion in August.
- Exports of goods and services decreased $3.7 billion, or 2.0 percent, in August to $185.1 billion. Exports of goods decreased $4.1 billion and exports of services increased $0.4 billion.
- The decrease in exports of goods mainly reflected a decrease in industrial supplies and materials ($2.2 billion).
- The increase in exports of services mainly reflected increases in financial services ($0.1 billion) and in travel (for all purposes including education) ($0.1 billion).
- Imports of goods and services increased $2.8 billion, or 1.2 percent, in August to $233.4 billion. Imports of goods increased $2.5 billion and imports of services increased $0.3 billion.
- The increase in imports of goods mainly reflected an increase in consumer goods ($4.0 billion).
- The increase in imports of services mainly reflected increases in travel (for all purposes including education) ($0.2 billion) and in transport ($0.1 billion), which includes freight and port services and passenger fares.
Goods by geographic area (seasonally adjusted, Census basis)
- The deficit with China increased from $28.8 billion in July to $32.9 billion in August. Exports decreased $0.6 billion to $9.8 billion and imports increased $3.6 billion to $42.8 billion.
- The deficit with the European Union increased from $12.4 billion in July to $14.5 billion in August. Exports decreased $0.7 billion to $21.7 billion and imports increased $1.4 billion to $36.2 billion.
- The deficit with Saudi Arabia decreased from $0.5 billion in July to less than $0.1 billion in August. Exports increased less than $0.1 billion to $1.8 billion and imports decreased $0.4 billion to $1.8 billion.
But most notable is that while US shale production is still providing a trade tailwind, the trade deficit excluding petroleum is almost back to all time record highs!
What happens if and when Saudi Arabia succeeds in eradicating US shale production and suddenly the US finds itself sporting the biggest consolidated trade deficit ever? Actually, with the Fed gearing up for QE4, that may just be what the PhDoctor ordered.