By: Mike Campbell
Every cloud is said to have a silver lining. The US Dollar has been slipping in value against the other major currencies all year. It has shed 10% of its value against the Euro over the course of 2009. This means that US exports have become 10% cheaper in Europe and they have become 6.5% cheaper in Japan; purely on the basis of the prevailing exchange rate. If you factor in discounted prices to make US exports more appealing (funded by better productivity), it is perhaps unsurprising that the US trade deficit has narrowed at last. Figures released for October reveal that US exports were at their highest level for nearly a year. The US trade deficit fell by 7.6% to $32.9bn. The export figures for the month were up 2.6% to $136.8bn, but the rise in US imports was a modest 0.4% or $169.8bn. The trade deficit with China rose by 2.5% for the month; trade with China accounts for $22.7bn of the US trade deficit. Some analysts claim that the figure is exaggerated because the Chinese Yuan is being kept at an artificially low price by the Chinese government.
Chinese Recovery Gathers Pace
Chinese industrial output for November was up by 19.2% and consumer prices have risen by 0.6% year-on-year. Chinese exports are still in decline, but November’s drop of 1.2% was the smallest this year. Chinese imports for November were up by 26.7% on the November 2008 level, placing the Chinese trade surplus with the rest of the world at a healthy $19.9bn. The Chinese government, however, has said that their fiscal stimulus measures will remain in place to try to boost domestic demand.
US Trade Deficit Figures Better Than Expected
DailyForex.com