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Trade Deficit Indicates 3Q GDP Uptick.

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    September 11, 2011

    trade-deficit-090811This week’s release of the trade deficit numbers (exports – imports) was not a shocker given the recent uptick in auto sales and weaker oil prices over the last month.  However, don’t get overly excited as we may very well see a sharp reversal in the coming month if the weak manufacturing indexes are any indication of real activity.

    Also, the recent strength in dollar, if you can call it that, has also help the situation.    As I said, while the bulls may get all excited over a one month number we have seen this headline before with the trade deficit:



    March 2011:  -46,397

    April 2011:  -43,242

    May 2011:  -50,182

    June 2011:  -51,570

    July 2011:  -44,809

    I would argue that while the July 2011 deficit number improved marginally back to April levels the overall economic enviroment has deteriorated since that period.

    This gives way to the fact that while this trade deficit number may provide a small positive push to Q3 GDP, since net exports are a primary component of the calculation, it is unlikely that it will provide a signifcant overall change particularly if the trend does not persist next month.

    The series, has been showing unusual volatility in recent months, tied to the Japanese earthquake, and to oil and gold price variations.  I still expect the general trend in the U.S. trade deficit to be one of net deterioration as consumers remain in a deleveraging process and are consuming less, hence lower import numbers.  Furthermore, any collapse in exports due to weaker international economies or further deterioration in U.S. consumption could lead to a quick increase in the deficit which would negatively impact future growth expectations.

    This months number does not materially change our outlook for a 1 to 1.4% range in GDP growth for the Q3.

    From Trade Deficit – Points To Possible Uptick In 3Q GDP.

    Images: Flickr (licence attribution)

    About The Author

    Lance Roberts – Host of Streettalk Live

    lance robertsAfter having been in the investing world for more than 25 years from private banking and investment management to private and venture capital; Lance has pretty much “been there and done that” at one point or another. His common sense approach has appealed to audiences for over a decade and continues to grow each and every week.

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