Although the October trade deficit increased from the nation’s trade deficit in September, it was $600 million less than anticipated.
The Commerce Department’s Census Bureau and Bureau of Economic Analysis released the October trade deficit report on Tuesday. (The report is also referred to as the “trade balance report”.) Although economists had been expecting the trade deficit to increase, the consensus estimate of $42.8 billion was $600 million higher than the actual result
From the report:
The U.S. Census Bureau and the U.S. Bureau of Economic Analysis, through the Department of Commerce, announced today that total October exports of $180.5 billion and imports of $222.8 billion resulted in a goods and services deficit of $42.2 billion, up from $40.3 billion in September, revised. October exports were $6.8 billion less than September exports of $187.3 billion. October imports were $4.9 billion less than September imports of $227.6 billion.
Also on Tuesday, the Commerce Department’s Census Bureau also released its report on October Wholesale Trade: Sales and Inventories. Although economists had been expecting inventories to increase by 0.4 percent, the actual increase was a more significant 0.6 percent and sales fell for the first time in three months. As a result, the inventories-to-sales ratio hit a three-year high. Real Time Recession Indicator 12. 12. 12
From the report:
Sales. The U.S. Census Bureau announced today that October 2012 sales of merchant wholesalers, except manufacturers’ sales branches and offices, after adjustment for seasonal variations and trading-day differences but not for price changes, were $408.5 billion, down 1.2 percent (+/- 0.7) from the revised September level, but were up 2.3 percent (+/-1.1%) from the October 2011 level.
* * *
Inventories. Total inventories of merchant wholesalers, except manufacturers’ sales branches and offices, after adjustment for seasonal variations but not for price changes, were $497.1 billion at the end of October, up 0.6 percent (+/-0.4%) from the revised September level and were up 6.6 percent (+/-1.1%) from the October 2011 level.
* * *
Inventories/Sales Ratio. The October inventories/sales ratio for merchant wholesalers, except manufacturers’ sales branches and offices, based on seasonally adjusted data, was 1.22. The October 2011 ratio was 1.17.
The October Job Openings and Labor Turnover Survey (JOLTS) from the Bureau of Labor Statistics indicated little change from September. Keep in mind that the latest non-farm payrolls report is for November.
From the JOLTS report:
There were 3.7 million job openings on the last business day of October, little changed from September, the U.S. Bureau of Labor Statistics reported today. The hires rate (3.2 percent) and separations rate (3.1 percent) were also little changed in October. This release includes estimates of the number and rate of job openings, hires, and separations for the nonfarm sector by industry and by geographic region.
The major ETFs expected to respond to the October trade deficit report, the October Wholesale Trade: Inventories and Sales report and the October JOLTS report are:
Consumer Staples Select Sector SPDR Fund (NYSEARCA:XLP) +0.03%
SPDR S&P Retail ETF (NYSEARCA:XRT) +0.38%
Consumer Discretionary Select Sector SPDR ETF (NYSEARCA:XLY) +0.34%
Industrial Select Sector SPDR ETF (NYSEARCA:XLI) +0.21%
Bottom line: Although the October trade deficit increased less than expected, the rise in the trade deficit, combined with the three-year high in the inventories-to-sales ratio, provide more evidence that the economic recovery is not moving along as steadily as we would like. These results could be highlighted as reasons for a fourth round of quantitative easing, which many commentators expect the FOMC to announce at the conclusion of its meeting on Wednesday. Will Bernanke Play Santa Again?