Trade Gap Shrunk in November as Exports Increased

U.S. trade continued to improve in November, according to the Bureau of Economic Analysis. Exports hit $159.7 billion, which set a new 27-month high. They were up $1.2 billion during the month. Although imports also rose to $198.0 billion, they increased by just $1.1 billion, which shrunk the trade deficit by about $111 million from October. The trend appears to be heading in the right direction.

Here's a chart showing some history, since 2008:

trade gap 2010-11.png

Most of the progress the U.S. has made in trade since the recession has been due to higher exports. They're up $20.7 billion year-over-year. Over that period, however, imports had risen even more, by $23.7 billion. So the trade deficit has widened compared to a year ago, by about $3 billion.

Still, trade appears to be steadily improving in recent months. As the chart shows, November was the third straight month the trade gap has declined. Its value of $38.3 billion for the month is also the smallest it has been since January.

Within exports, goods continue to drive the improvement. Services exported actually declined slightly in November. There was very little growth in that latter component of exports in 2010.

Of course, the same could be said for imports. Americans continue to more aggressively increase the amount of goods they purchase from overseas. Imports for services, on the other hand, barely increased last year. In fact, if looking at services only, you find the U.S. with a trade surplus of $12.9 billion. The nation's love of cheap goods from overseas drives the trade gap.

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Which types of goods were most responsible for November's rise in exports? Pharmaceuticals topped the list, with $981 million more in overseas sales during the month. Other big gains were seen with raw cotton, petroleum, civilian aircraft, and semiconductors, which saw foreign sales increase by $483 million, $426 million, $420 million, and $217 million, respectively.

Today's trade report provides positive news in two ways. First, it shows that the U.S. continues to export more products overseas. As foreign demand for U.S. products increases, U.S. jobs should follow. The consistent rise in imports can also be interpreted to mean that domestic demand continues to pick up, which shows the U.S. economy slowly warming. The bad news, of course, is that some of the money spent on imports could be used to purchase goods and services produced in the U.S. instead, which could help to create jobs at home.