Instant view: Trade deficit narrows; import prices rise
The U.S. trade deficit narrowed much more than expected in October, as exports rose a robust 3.2 percent and imports declined slightly in the face of slackening demand for industrial and petroleum products, a Commerce Department report showed on Friday.
U.S. import prices in November rose saw their fastest pace in a year as petroleum and food costs maintained their upward trend, according to a government report on Friday that hinted at a pick up in imported inflation.
KEY POINTS: * The trade gap totaled $38.7 billion, down from a revised estimate of $44.6 billion for September. * Analysts surveyed before the report had expected the October trade deficit to narrow just slightly to about $43.60 billion. * The trade deficit has widened sharply this year and could surpass $500 billion when final figures for 2010 are available.
COMMENTS:
PETER CARDILLO, CHIEF MARKET ECONOMIST, AVALON PARTNERS, NEW YORK:
Trade deficit came in very strong and exports were strong as well which is positive for the market. Import prices were a bit higher and we do have a selloff in the Treasury market which might weigh on stocks a bit later on. But overall, this is a very good number and good for economic activity. We can expect this quarter to come in stronger than anticipated.
BRIAN JONES, SENIOR ECONOMIST, SOCIETE GENERALE, NEW YORK
The $5 billion-plus drop in the real trade deficit is going to add to fourth-quarter GDP growth.
ROBERT PAVLIK, CHIEF MARKET STRATEGIST, BANYAN PARTNERS LLC, NEW YORK:
We're seeing a little more heat in some of the prices of imported goods, but I wouldn't be overly concerned about that. The trade balance figure, while it looks good on the surface, is slightly offset by the revision to September. But there's a reasoning behind the trade number shrinking, and it's because we're still in a slower-growth economy. You'd imagine that a smaller number would be a good thing, but it's because people still have to contend with a slower economy.
This isn't going to be market moving. What people are focused on is the dollar and Europe. EU members are meeting this weekend and to discuss their plans as far as supporting the financial package; that's going to be something to watch. We're also going to be looking at the reaction to China. There's some concern about them raising rates this weekend, though I doubt that will happen since they just raised reserve requirements. Still, it should keep a lid on markets today.
MARKET REACTION: STOCKS: U.S. stock index futures hold gains BONDS: U.S. Treasury bond prices added to losses in the long end FOREX: The dollar held steady
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