U.S. trade deficits in airplanes, agriculture and most other industries worsen in September -- More automotive and China trade troubles too...




Report from 11/10/05



The Census Bureau's report today of a sharply worsening, nominal record deficit of -$66.1 billion for goods and services over the 30 days of September (a record -$71.1 billion for goods alone) requires a markdown to initial Q3 estimates of a 3.8% GDP growth rate.

Today's report keeps unprecedented pressures on global financial markets, interest rates and the exchange value of the US dollar. The US must continue to sell assets or borrow - net of all US foreign acquisitions and lending -- at the pace of well over $2 billion per day. The US goods and services trade deficit is worsening by -18% over the first nine months of 2005, on a pace to surpass the full record -$678.1 Current Account deficit of 2004 reaching well over -$800 billion this year and with no end in sight.

Even more important than the effect on financial markets of today's once unthinkable imbalances are the severe effects on the US capacity to competitively produce as much as it needs. US agricultural suffered a deficit in September while its year-to-date surplus is now down -49% even from the meager surplus last year that was the smallest since 1987. The US also suffered a rare deficit in airplane trade in September as a strike by Boeing aerospace workers sharply reduced deliveries. (However, a spike in aircraft sales in prior months suggests the slowdown in September was anticipated.)

The year-to-date US deficit in autos/trucks/parts raced past -$100 billion in September on a pace just short of last year's record -$137.4 billion deficit. The deficit in auto parts is on a pace that is -25.5% worse than last year.

Through the first nine months of 2005, 55 of the total 81 industries in the SITC goods categories are in deficit with 59 of 81 industry balances worsening this year from last year.

As of September, the US has now accumulated net payments for trade deficit in goods AND services with China totaling -$1.017 trillion. During this time the US has accumulated deficits with China in traded goods totaling -$1.037 trillion while managing a total surplus in traded services of $0.020 trillion. In September, the US suffered a record -$20.1 billion deficit in goods trade with China as the US sold goods to China worth $3.2 billion and paid $23.3 billion for imports from China. Monthly data for services trade with China are not available but the US likely had a monthly services surplus of about $0.15 billion - mostly as a result of spending by Chinese students studying in the US. (The US surplus in services trade with China fell by -22% in 2004 to $1.6 billion.)

Finally, today's report shows the now-chronic US deficit in Advanced Technology Products worsening to a near record -$5.6 billion in September. Much of this monthly deficit is due to the sharp drop in Boeing deliveries in September. However, the year-to-date deficit in ATP is -33% worse than during the same period last year on track to set a new record deficit of about -$50 billion in products the Department of Commerce identifies as the world's most advanced. For the second year in a row, the US deficit in advanced technology products is larger than the total US surplus in intellectual product services - royalties and fees.

China accounts for (more than) the entire US deficit in advanced technology products and that deficit is worsening by 35% again this year on a flood of high quality but extremely cheap technology imports.

Attached is my table showing industry-by-industry exports, imports and balances, year-to-date. I've also attached a table showing major market import, exports and balances in the auto sector. Lastly, I've included a table that shows the more than $1 trillion in accumulated US payments to China goods and services since 1990.

Best,
CWM



Charles W. McMillion, Ph.D.
President & Chief Economist
MBG Information Services
Washington, DC 20002-4928
Voice: (202) 544-6490
Mobile: (202) 257-9802
Fax: (202) 546-1446
mbginfosvcs.com


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