Higher Oil Prices Widen US Trade Deficit

Higher Oil Prices Widen US Trade Deficit

Higher Oil Prices Widen US Trade Deficit

Statistics Canada says the country's merchandise trade deficit narrowed to $1.5 billion in October as exports improved and imports took a step back.

Economists had expected a deficit of $2.7 billion, according to Thomson Reuters.

Imports rose 1.6 per cent over September to US$244.6 billion, seasonally-adjusted, the highest since the Commerce Department began publishing the statistic in 1992.

The U.S. imported more barrels of crude oil in October compared with the prior month, and at a higher average price.

TD Bank economist Dina Ignjatovic noted that the recovery in export volumes in October fully erased declines in August and September and provides a stronger hand-off for the fourth quarter.

Exports to China, meanwhile, were the highest in nearly four years, at US$13 billion. In short, if consumers and producers are spending more on foreign products, while foreigners were spending less on American-made goods and services, that brings down overall spending on USA products world-wide.

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Apart from the $1.5-billion increase in crude oil imports, the higher US import bill was due to the highest on record imports of food, feeds, and beverages, and the highest on record non-petroleum imports.

Worldwide trade data can be volatile from month to month.

But trade deficits this year - which have reached $462.9 billion and are up 11.9 percent from last year - are on track to eclipse 2016 levels and will likely climb to more than $500 billion by year's end.

World trade flows have grown this year, as global economies are growing in sync and at almost the best paces since the recession. US exports to China increased $2.2 billion to $13.0 billion, primarily driven by soybeans and crude oil.

The U.S. Chamber of Commerce said in a May report that they disagree "with the contention that the goods trade deficit is an appropriate gauge of whether a particular set of trade policies - or trade agreements - is delivering benefits to the American people more broadly". Economists attribute the chronic trade deficit the USA has faced for decades to Americans consuming more than they produce relative to the rest of the world's economies.

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