BetterTrades
Buying American Made? Not So Much
As the nation deals with an auto industry skidding to a halt and the crisis in confidence in the financial sector, Thursday morning's Trade Deficit report for November offered little cause for optimism. While the pace of foreign goods consumption is slowing, much like the realities facing the auto industry, Americans continue to show a preference for goods produced abroad.
On Thursday morning, the Commerce Department reported the U.S. trade deficit grew by 1.1% in
October as oil imports climbed to 324.2 million barrels from 253.3 barrels in September. Imports
fell by 1.3% to $208.9 billion, mostly due to a drop in capital goods. Exports dropped by 2.2% to
$151.7 billion.
The three-month moving average, which smoothes volatility in the monthly report, shows the deficit has been decreasing since near the end of this spring. This decline is mostly attributable to the global slowdown and a drop in petroleum imports.
Before the trade deficit report, the Labor Department announced import prices dropped sharply in November. But the headline from the labor report showed a 58,000 increase in weekly jobless claims for the week ended December 6th, representing a 26-year high.
A widening in the trade gap occurred despite a record 25.8% drop in imported crude prices during November. Headline import prices declined 6.7%, mostly because of a decline in fuel prices, but also due to the record 1.8% fall in non-petroleum imports. Deflation has been a staple of the import price report since the peak of this summer's energy crisis.
The auto problem mirrors what has become a staple of American consumption. Last year, Ford relinquished its position to foreign-owned Toyota as the number 2 automaker in the U.S. as measured by total sales. A mounting trade deficit and growing federal deficit are not unrelated. As the government doles out billions in bailout dollars to automakers and financial institutions, one has to wonder about the increasing role Americans are playing by purchasing foreign-made goods. The mantra "Buy American" is clearly not registering with main street.
