October International Trade, JOLTS, November NFIB Survey

            Business Optimism Fell in November, Survey Says Election to Blame

  • The U.S. International Trade gap widened slightly as expected in October to -$42.2 billion.
  • The NFIB Index of Small Business Optimism declined a sizeable 5.6 points in November.
  • The JOLTS data for October shows a small uptick in both hiring and separations for the month.

The U.S. international trade gap widened slightly in October, about as expected to -$42.2 billion. Trade is not expected to be a major factor in fourth quarter GDP growth. Both exports and imports declined in October but exports fell more. Total nominal exports dipped by $6.8 billion for the month. Imports were down by $4.9 billion. Trade data can fluctuate month-to-month so short-term comparisons can be misleading. However, when we step back and take a broader view of the trade report we can say that both exports and imports look about equally subdued, and that has kept the overall trade balance fairly stable over the last five months. U.S. exports to the European Union remain weak, down 7.4 percent in October from a year earlier. Recession in Europe (including depression in parts of southern Europe) is a drag on U.S. GDP, but falls well short of the dampening power of the self-induced Fiscal Cliff. U.S. exports to Pacific Rim Countries (as defined by the BEA) have also cycled down, 1.9 percent below year-ago levels as of October. Two other factors influencing the U.S. balance of trade are worth noting. First is the impact of the Federal Reserve’s ongoing program of quantitative easing.  QE by the Federal Reserve puts downward pressure on the value of the dollar, but that may be balanced by quantitative easing in the comparison region, such as the Euro zone. With the open-ended QE3 program now in place, and likely to be expanded, trade to Europe is very much influenced by the actions of the U.S. Federal Reserve and by the European Central Bank. Also, energy is an increasingly important part of U.S. exports and will be a smaller part of U.S. imports, especially from the Middle East. Energy imports from Canada are ramping up but come without the heavy geopolitical baggage.

The National Federation of Independent Businesses’ Small Business Optimism Index fell sharply in November, down 5.6 points, described as “one of the largest declines in survey history.” Two events pushed the index down; one was Hurricane Sandy, and the other was the election. According to the survey, “the election was the primary cause of the decline in owner optimism, not the hurricane.” Fortunately, the drop in owner optimism did not drag labor market indicators down in the same proportion.  Labor market indicators in the survey are weak, but do not indicate a shift toward down-sizing. The Jobs Openings and Labor Turnover Survey (JOLTS) for October showed a small gain in both hiring and separations. Both moves were within recent ranges so we cannot say that labor market conditions changed much through the month.

Market Reaction: U.S. equity prices are up. Treasury yields are up. NYMEX crude oil is down to $85.52/barrel. The dollar is up against the yen and down against the euro.

Click here for a PDF version of the Comerica Economic Alert: Int Trade 121112.

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