This Economics Stuff: Wow! It Works!

To the surprise of very few economists this appears today:

The shortfall in traded goods and invisible earnings fell to $178.5bn (£88.6bn) in the third quarter, down 18pc from a year ago. It is the clearest evidence to date that the weak dollar is working a powerful effect on American competitiveness, restoring health to a swathe of manufacturing industries after years of decline.

Well, there might be the occasional raised eyebrow at that comment about manufacturing: it's manufacturing employment that keeps falling in the US, not output. But yes, it's nice to see proof once again that demand curves slope downwards. As something becomes more expensive (imports for Americans) then people buy less of it and as they become cheaper (American exports for foreigners) then they buy more.

In fact, the only two surprises that come from these trade figures involve a technical matter called J-Curves (things will get worse before they get better essentially, because, as I have just done, some importers will hoick the cost of essential imports to maintain margins amongst other things: oil is obviously more important here) and this is very surprising indeed:

Echoing the powerful shift in the trade picture, the US Treasury data showed a huge inflow of $114bn in net capital flows into the US in October, including a $30bn net spree on US equities.

Given the basic identities, any current account deficit must be offset by a capital account surplus: so as the trade account narrows towards balance, so must the capital inflows.

It's not actually possible for them both to be surging at the same time so that arithmetic is awry somewhere or other. Still the comparison is one month against the quarter, so it doesn't do to be too picky about these sorts of things.