Wednesday, December 14, 2005

Trade Deficit Widens, Import Prices Fall, Oil Supplies Rise

- The Trade Deficit for October widened to -$68.9 billion versus -$66.0 billion in September.
- The Import Price Index for November fell 1.7% versus estimates of a .5% decline and a .3% rise in October.
- The EIA reported crude inventories rose 892,000 barrels vs. estimates of a 1.5 million barrel drawdown. Gasoline inventories rose 1.76 million barrels vs. estimates of a 1.0 million barrel increase. Distillate supplies fell 88,000 barrels vs. estimates of a 600,000 barrel build. Refinery utilization fell 1.0% vs. estimates of a 0.5% increase.
BOTTOM LINE: The US trade deficit unexpectedly widened in October, as imports of crude oil, automobiles and televisions increased, Bloomberg reported. Imports rose 2.7% and exports rose 1.7% during the month. I continue to believe the trade deficit will only improve marginally over the intermediate-term as US economic growth continues to exceed that of most other major global economies, offsetting other factors.

Prices of goods imported into the US fell more than expected in November, reflecting cheaper oil, natural gas and building materials. I expect import prices to rise in the near-term before anther push lower next quarter.

Oil is slightly lower on the EIA report. Crude supplies are still well above-average levels for this time of the year. The drawdown in distillate supplies is likely the result of switching from natural gas.

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