September 2010 International Trade

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According to data compiled by the Netherlands Bureau for Economic Policy Analysis, the volume of world trade declined by 0.6 percent in September, on the heels of a downwardly revised 1.4 percent (originally 1.5 percent) increase in August. World trade increased by 0.9 percent in 3Q2010 when compared to the previous quarter, the lowest quarterly gain since 2Q2009.

Import volumes declined both in advanced and emerging economies, the major exception being Latin America, where imports continued to grow strongly. Imports fell most heavily in the Euro Area. The only regions that achieved positive export growth were Latin America and Central and Eastern Europe, the latter doing remarkably well after having experienced several months of declines.

Although the growth in global demand appears to be slowing, prices have not yet fallen by an appreciable degree; in fact prices moved higher (by nearly 0.7 percent) for a third consecutive month in September.
 

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Turning to the United States, total September exports of $154.1 billion and imports of $198.1 billion resulted in a goods and services deficit of $44.0 billion, down from $46.5 billion in August (revised up from $46.3 billion). September exports were $0.5 billion more than August exports of $153.6 billion while imports were $2.0 billion less than August imports of $200.1 billion.
 

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The trade slowdown appears to be affecting the U.S. paper exports. Exports of wood pulp, paper and paperboard retreated by 139,000 metric tons (4.6 percent) in September. At the same time, imports rose by 43,000 tons (11.4 percent). Despite the retreat, exports remained well above year-earlier levels.
 

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Softwood lumber exports ticked up by 7 million board feet, while imports declined by virtually the same amount. Exports are 54.3 percent higher than year-earlier levels, but imports are down by only 1.9 percent.
 

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With the U.S. dollar weakening in October by nearly 3 percent against a basket of 26 currencies, we would not be surprised to see the October trade deficit widen. Although there is considerable monthly “noise” in the relationship between the dollar’s value and the magnitude of the trade deficit, in broad terms the deficit widens when the dollar depreciates. Conversely, the deficit narrows when the dollar appreciates.