US Trade Deficit Decreases - Domestic Oil Production Increasing - Government News | Financial Buzz

US Trade Deficit Decreases – Domestic Oil Production Increasing

Earlier this week, the US Department of Commerce released improved trade numbers, with the highlight being a decrease in the country’s trade deficit. The main reason for which, was an increase in exports – especially in the energy sector. This is a result of investment in domestic oil production which has been growing since the presidency of George W. Bush, and points to a desire for more energy independence. The lower trade deficit is a sign that the American economy is leveling out regarding the relationship between production and consumption, a balance that has been tilting towards consumption for many years. Exports were at the highest level ever for the US, and the deficit itself was 10.6% lower than last year. Exports increased by a total of 2.7% this year, whereas imports have remained steady when compared to last year’s numbers.

Exports Rose 1.8% in October

The US economy set a new record of $192.8 billion in exports in October, strongly supported by a 6% increase in petroleum exports. On the other hand, imports added 0.4% rising to a total value of $233.3 billion for the month of October. During this period, foreign oil purchases increased 1.5%. These numbers represent a narrowing of the trade gap, which has been negative since the mid-1980s. The trade deficit was at $40.6 billion for October, according to the US Department of Commerce, which is a significant 5.4% lower than in September which was valued at $43 billion. For the year, petroleum exports have increased 9.3% as compared to 2012, and imports of such products have decreased 11.1% fueled by lower global prices.

US-China Trade Numbers

American exports to China also reached a record $13.1 billion in October, though the number is still far lower than the $41.9 billion in imports from China, which is also a record. The United States’ trade imbalance with China is the largest of any country, and is up 2.1% over the year, heading towards a new high. The practice of calling China a “currency manipulator” has been prevalent especially from American politicians and business leaders; in October an Obama administration report reiterated the belief that the Chinese RMB is largely undervalued, though it did not use the term manipulator which could have caused trade sanctions.

Overall Growth up 3.6% in July-September QuarterInitial growth numbers on Wednesday were at 2.8%, but were reviewed upwards to 3.6%. This number comes in way above the expected review increase to 3.1%. Economists say that the growth increase is supported by the reduction of the trade deficit. Chief US economist at Capital Economics, Paul Ashworth, is quoted as saying that 4th quarter growth is expected to be over 2%.

Will the Growth Continue?The rise in exports for October follows three months of lower numbers, and analysts believe future numbers will continue to increase. The given reasons are primarily the stable recoveries in Japan, China and Europe, where stronger demand is helping to increase production in the United States. An important November economic number was released recently, which showed that US manufacturing activity rose to its highest level in 2.5 years. Barring unforeseen circumstances, the general sentiment is that the US will see a growth in production and a healthy narrowing of the trade deficit over the next couple of quarters.