Exports Strengthen with Weak Dollar
One of the few bright spots in any US based recession is that exports typically strengthen as the US dollar weakens. This recession has been no different. For the sixth straight month, the US trade deficit has shrunk as Americans export more and import less.
By the Numbers
The trade deficit dipped to $32.9 billion in October, lower than the $35.7 billion deficit in September. Exports jumped a whopping 2.5% despite weaknesses in important sectors like the automotive and electronics industry. Imports grew slightly, showing a .4% growth in October mostly due to ebbing oil prices.
The Annual Pace
If there is any bright spot to be found during recessions it is that almost always the trade deficit shrinks.
With 10 months of imports and exports already on the books it appears as though this year will show a $364.8 billion trade deficit, nearly half the total trade deficit through 2008. Much of the change in the trade deficit can be linked to weak consumer demand. Access to credit as well as a decreased willingness to spend on the consumer side is having huge effects on the trade deficit.
A Dollar Rally?
A smaller trade deficit lends way for a small reversal in the trend for the US dollar. Even Jim Rogers, who has been incredibly bearish on the dollar, is buying US dollars for a short term gain. It should come to no surprise that the dollar is rallying with foreign governments and businesses facing default as well as the United States exporting less dollars and borrowing more cheaply. Though the trend may not sustain itself, the US dollar could enter a bear market for at least a few months as the market rebalances itself to match new economic data.
