The U.S. trade deficit returned to more normal levels in October, jumping more than US$10 billion.

The trade deficit jumped $10.4 billion to $29.4 billion in October, somewhat wider than expected. (All figures in US dollars). BMO Nesbitt Burns indicates that the lion’s share of the widening from $19 billion in the prior month represents swings in re-insurance payments. “The data are constructed as though domestic insurers and final insurance buyers from foreign firms are gambling with foreign insurance firms. When an event triggers a payment to U.S. companies or residents, that counts as a drop in net insurance payments to foreigners, or reduced imports.”

BMO says that the trade figures are uniformly bleak. “For example, real goods exports peaked near $74 billion last year and are running under $64 billion monthly lately. Imports of goods topped $112 billion last year and are just above $98 billion now. If anything, trade gap narrowing has cushioned manufacturers in the recession so far, but the recent plunge in exports looks bad.”

CIBC World Markets calls the trade recovery “disappointing”. Setting the insurance distortion aside, it says, two-way trade flows looked anemic, underscoring that September’s weakening was more than just a month of border delays. “With U.S. trading partners in or near recession, exporters continued to struggle in October. The message in these data is that nearly all of the September export decline was due to demand weakness, as opposed to being a distortion from border delays.”

With only one month in, CIBC says that it’s too soon to make much use of these data in calibrating the contribution of trade to Q4 GDP. “But the sluggish pace of trade in both directions is a hallmark of ongoing recessions at home and abroad.”

BMO concludes, “The trade sector is imploding. Doubtless the situation will not turn out to be as bad as current trends seem to predict. But it would be a welcome relief to hear about foreign economies gaining a bit of speed. And the super-strong U.S. dollar remains a major impediment to a solid recovery next year, both impeding exports and encouraging imports to block any pickup in U.S. demand from helping U.S. manufacturers.”