Trade data reveal US slowdown

US automakers: running into tough times

Trade figures on Friday highlighted the slowdown in the US economy, revealing a fall in both imports and exports in November.

These numbers are pretty much as advertised, so there's going to be limited impact on the market

Ram Bhagavatula, Royal Bank of Scotland.

Total imports fell 1% over the month to $123.35bn, with shipments of oil, car parts and computers notably weak.

But with exports dropping by 0.9%, to $90.36bn, the key trade deficit figure narrowed during November to $32.99bn, in line with Wall Street forecasts.

The trade gap has now shrunk for two months in a row for the first time since June and July 1997.

But the deficit is still close to the record monthly high of $33.7bn set in September.

Year record

The figure for 2000 as a whole is forecast to come in at a record $366bn, compared with $265bn for 1999.

The deficit has remained at record levels throughout Bill Clinton's time as US president, prompting criticism that his free trade policies have cost thousands of American jobs.

The high level of imports reveals a weakness in US industry, some critics claim.

There are also worries that the huge trade deficit will become unsustainable, ultimately leading to a run on the US dollar.

Up to now, foreign companies and individuals have been happy to invest in America, helping to finance the trade gap.

But with a falling stock market and a possibility of a more general slowdown, US investments might become less attractive to the rest of the world.

Weak car trade

Imports of cars and car products fell by $179m to $16.6bn in November, reflecting the sector slowdown which has prompted manufacturers to order production cuts.

Demand for goods such as telecoms and computer equipment dropped by $785m, seen by analysts as an indication of a slowdown in the amount US businesses are spending on upgrading facilities.

Car exports were also weak over the month, with trade in agricultural products also slow.

On a geographical basis, the deficit narrowed in trade with all major countries except Canada.

Market reaction

The data was seen as holding few surprise for financial markets.

Exports across the board are down. That doesn't bode well for the dollar or the US economy

Kathy Bostjancic, Merrill Lynch Government Securities

"These numbers are pretty much as advertised, so there's going to be limited impact on the market," said Ram Bhagavatula, chief economist at Royal Bank of Scotland.

But Kathy Bostjancic, senior economist at Merrill Lynch Government Securities, warned over an unexpected fall in both exports and imports.

"Exports across the board are down. That doesn't bode well for the dollar or the US economy."

At 1500 GMT, half an hour after US stockmarkets opened, the benchmark Dow Jones Industrial Average share index stood 0.53% lower at 10.620.94.

The tech-weighted Nasdaq stood up 0.84%.

The euro stood at $0.9385, half a cent below Thursday's close, soon after the figures were released.