The fading strength of U.S. exports
U.S. exports posted their biggest drop in nearly four years in October, pushing the U.S. trade deficit higher despite a decline in imports to their lowest level in 1-1/2 years.
The data reveal that U.S. exports of goods and services have now decelerated to a year-on-year growth rate of just 1 percent compared with 2.8 percent in the third quarter of 2012 and 11.5 percent last year at this time, writes Deutsche Bank Securities chief U.S. economist Joseph LaVorgna in a research note.
We are concerned by this export trend, not only in October, but over the past several months, because exports have contributed an outsized share to economic growth in the current cycle. If exports fade away as an economic driver in the near-to-medium term, other domestic engines will need to accelerate in order to pick up the economic slack and maintain growth near 2.0-2.5 percent. We think this is possible if fiscal cliff concerns are adequately addressed. The domestic offset will come from continued recovery in the housing sector, as well as pent-up demand from households and businesses.