(What’s Left of) Our Economy: Another U.S. Trade Deficit Surge on the Way?

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Biden administration, Canada, CCP Virus, China, coronavirus, COVID 19, Delta variant, exports, goods trade, imports, lockdowns, manufacturing, manufacturing trade deficit, merchandise trade, semiconductors, services trade, South Korea, Taiwan, tariffs, Trade, trade deficit, Wuhan virus, {What's Left of) Our Economy

A day after the Biden administration began laying out its “strategic vision” for trade policy toward China (which looks an awful lot like the tariff-heavy Trump administration policies decried by candidate Biden), this morning’s latest official U.S. monthly trade figures reminded that the predatory People’s Republic is hardly the only obstacle to an improved national trade performance.

Some of the distorting effects of the stop-start nature of the CCP Virus-era U.S. and global economies can be seen in the statistics. Principally, the last three data months have seen a month-on-month increase in the overall U.S. deficit in June, a decrease in July, and the rebound reported in today’s August release.

At the same time, through May, the growth of this total goods and services deficit was pretty sluggish. Since June, though, it’s remained above $70 billion for three straight months. (as will be detailed below).

At least as troubling – the rates of change in trade deficit increases and decreases, and in the economy’s rates of growth and shrinkage never match up exactly in the short run, because of lag times between orders and the receipt of supplies of traded goods in particular. But it’s not good news that whereas the U.S. economy grew at after-inflation annual rates topping six percent in each of the first and second quarters (ending in June) while the trade gap’s growth was pretty sluggish, third quarter growth could well be much slower (see, e.g., here), and the trade deficit seems to be settling in at higher levels.

To return to the China data – not that they were good. The S$31.74 billion U.S. merchandise deficit with the People’s Republic was the biggest monthly total since July, 2019’s $32.68 billion, and was up sequentially by 10.79 percent. Goods imports rose 6.51 percent on month to just under $43 billion for their highest level since last November. But merchandise exports sank month-to-month by 3.94 percent, to $11.26 billion – their lowest level since February.

Even so, the August trade report showed again that, longer term, the Trump tariffs are bringing and keeping America’s huge and longstanding China goods trade gap under control. Specifically, this deficit is up 13.65 percent year-to-date – much more slowly than the closest global proxy, America’s non-oil goods deficit (19.11 percent).

As for the headline U.S. combined goods and services trade deficit, it rose in August by 4.19 percent, from a slightly upwardly revised $70.30 billion to a new record $73.25 billion.

The merchandise trade shortfall increased, too – but by just 1.82 percent sequentially. And the $89.41 billion total, while high by historic standards, still trailed the $93 billion-plus top-two levels hit in March and June (the latter’s $93.26 billion remaining the record).

The August services trade surplus of $16.16 billion, however, was the lowest since December, 2011, and fell by 7.74 percent from July.

Several other records were set by the August results in the broadest U.S. trade flow categories. On the negative side, total U.S. imports hit an all-time high of $286.99 billion during the month, as did goods imports ($239.11 billion). But at $149.69 billion, August goods exports hit their second consecutive historical best.

And speaking of records, manufacturing’s $116.88 billion trade shortfall represented another. The August total was 5.76 percent greater than July’s $110.05 billion and exceeded the previous all-time worst (June’s $114.06 billion by 2.47 percent).

Delving more deeply into the manufacturing numbers, industry’s exports did improve by 1.95 percent sequentially, from $95.22 billion to $97.13 billion. But the much greater amount of imports jumped more than twice as fast – by 4.03 percent, from $205.72 billion to $214.01 billion.

On a January-August basis, the manufacturing deficit has ballooned by 23.77 percent, from $686.36 billion to $849.50 billion – making a fourth straight trillion-dollar trade gap for industry all but certain.

Year-to-date, manufacturing exports have grown by 19.28 percent, but imports remain more than twice as great, and they’ve swelled by 21.64 percent.

Some more records and notable results:

>At $3.73 billion, the August goods trade deficit with global semiconductor manufacturing superpower Taiwan set a fifth straight monthy record.

>The merchandise gap with South Korea, another leading semiconductor manufacturer, soared by 51.18 percent to $3.15 billion – its third highest total all-time.

>And the goods shortfall with Canada, America’s third largest goods trade partner (after the European Union and China, respectively) surged 24.48 percent, to a $5.33 billion level that was the loftiest monthly amount since October, 2008 ($5.65 billion).

The bear case for the trade deficit is easy to identify: For example, if it’s been rising even as the CCP Virus’ highly contagious Delta variant and related economic and behavior curbs are depressing growth, it’s sure to rise higher and faster as the Delta wave keeps showing signs of weakening, and growth picks up again. Further, whenever unsnarling begins of the kinds of logistical snags that have disrupted supplies of semiconductors and created long backups at ports on America’s West Coast and elsewhere, U.S. imports in particular will rise even more rapidly.

The bull case seems to depend mainly on the winding down domestically and internationally of the virus – which will help America’s trade partners finally to start catching up with the United States recovery-wise, and therefore to step up net buys of U.S. imports. (See, e.g., here.) There are also the arguments that supply chain normalization will help restore domestic U.S. business’ export potential; and that the Biden administration has just made clear that the vast bulk of the steep and sweeping Trump China tariffs will remain in place for the foreseeable future – which will keep pricing enormous amounts of imports from China out of the U.S. market.

At this point, the fence looks like the safest place to be analytically, as has often been the case for the pandemic economy. So that’s where I’ll sit regarding future prospects for the trade deficit – but leaning a little toward the bearish side for now.

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Glad I Didn’t Say That! Vaccine Derangement Syndrome

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Associated Press, CCP Virus, coronavirus, COVID 19, Delta variant, Glad I Didn't Say That!, Mainstream Media, MSM, vaccination, vaccines, Wuhan virus

“Tens of millions of Americans have refused to get vaccinated,

allowing the highly contagious delta variant to tear through the

country….” 

– Associated Press, October 2, 2021

 

“Virus surge hits New England despite high vaccination rates”

– Associated Press, October 3, 2021

 

(Sources: “COVID-19 deaths eclipse 700,000 in US as delta variant rages,” by Tammy Webber and Heather Hollingsworth, Associated Press, October 2, 2021, https://apnews.com/article/coronavirus-pandemic-dead-us-milestone-80209c66802902e42adfbe075ff5272b and “Virus surge hits New England despite high vaccination rates,” by Wilson Ring, Associated Press, October 3, 2021, https://apnews.com/article/coronavirus-pandemic-health-pandemics-vermont-d25aae90b2dda65b3d1c2c0d5d00156c)

(What’s Left of) Our Economy: U.S. Manufacturing’s Now Defying Hurricanes and Delta

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aircraft, aircraft parts, appliances, Boeing, CCP Virus, chemicals, computer and electronics products, coronavirus, COVID 19, Delta variant, electrical equipment, fabricated metal products, facemasks, Federal Reserve, furniture, Hurricane Ida, inflation-adjusted growth, machinery, manufacturing, masks, medical devices, medicines, oil refining, paper, personal protective equipment, petrochemicals, pharmaceuticals, plastics, PPE, real output, semiconductor shortage, supply chain, travel, ventilators, Wuhan virus, {What's Left of) Our Economy

Domestic manufacturing’s done it again. Just as with the Labor Department’s August jobs report, the Federal Reserve’s new release on manufacturing output for the month shows that industry kept dodging whatever potholes the CCP Virus and its highly infectious Delta variant keep digging for the rest of the U.S. economy.

America-based manufacturers’ inflation-adjusted production grew by a meager 0.11 percent sequentially in August. But output was held down by facility closures forced by Hurricane Ida in the petrochemicals, plastics resins, and petroleum refining sectors. Overall revisions were mixed, but some upgrades and downgrades in individual major industries were pretty remarkable, as will be seen below.

The biggest winners in the new price-adjusted manufacturing production report were the small, catch-all “other manufacturing” category (2.42 percent); furniture and related products (up 2.07 percent); computer and electronics products (whose 1.21 percent output rise may have been a response to the worldwide shortage of semiconductors); paper (up 1.07 percent); and fabricated metal products (up 0.74 percent).

The biggest losers were electrical equipment, appliances, and components (down 1.16 percent); textiles products (down 0.81 percent on month); machinery (down 0.80 percent); and the big chemicals sector (down 0.49 percent).

Normally, the machinery results would be discouraging, since its products are used so widely both in the rest of manufacturing and also in big non-manufacturing industries like agriculture and construction. But its August dip followed a July jump of 3.31 percent – its best production improvement since January’s 4.63 percent – which was dramatically upgraded from the previously reported 1.91 percent.

The electrical equipment category followed a similar pattern. Its July real production results were revised all the way up from 2.31 percent to 3.95 percent – its best such performance since January, 2010, when the economy was still in its early bounce-back from the Great Recession that followed the global financial crisis.

Also enjoying a solid August were two narrower manufacturing categories that remain in the news due to the ongoing effects of the CCP Virus. Air travel has of course suffered throughout the pandemic-era, and aerospace manufacturing giant Boeing has been hit with numerous related manufacturing and safety problems (including some pre-dating the pandemic, like the grounding of the popular 737 Max jetliner).

Yet aircraft and parts production in constant dollars advanced by 0.34 percent in August, and in another major revision, July’s previously reported 2.78 percent increase is now pegged at 4.10 percent – its best such result since January’s 6.79 percent burst. And June’s downgraded 3.57 percent rise was bumped back up to 3.84 percent. As a result, aircraft and parts production is now 12.63 percent higher in after-inflation terms than in February, 2020 – the last full data month before the virus began significantly affecting the U.S. economy.

The pharmaceuticals and medicines sector (which includes vaccines) saw a real month-to-month production increase of 0.89 percent in August, and revisions were modest and mixed. These results left inflation-adjusted output 12.33 percent higher than its immediate pre-pandemic levels.

But August real production sank sequentially by 1.73 percent in the vital medical equipment and supplies sector – which includes virus-fighting items like face masks, protective gowns, and ventilators.

On the brighter side, July’s initially reported 1.71 percent constant dollar production rise was revised up to 2.42 percent. June’s dramatically downgraded 1.54 percent decrease was upgraded to a 0.13 percent drop, and May’s upwardly revised 1.86 percent real growth was downgraded only slightly – to 1.78 percent. Even so, on a price-adjusted basis, this crucial industry is just 2.66 percent larger than before the CCP Virus arrived in force.

Domestic industry still faces important headwinds of course – and not just from the possibility that Delta keeps worsening America’s public health and economy, and that approaching winter weather triggers a new wave of infections, hospitalizations, deaths, and restrictions. Those global supply chain snags are still with us, too.

But throughout the pandemic era, U.S.-based manufacturers have overcome obstacles just like this, and their consistent vigor indicates that it’s the pessimists about their future prospectswho now face the biggest burden of proof.

Im-Politic: The Case Against Sweeping Vaccine Mandates and Passports

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CCP Virus, coronavirus, COVID 19, Delta variant, healthcare, hospitalizations, Im-Politic, immunity, mortality, natural immunity, Nature, public health, unvaccinated, vaccination, vaccine hesitancy, vaccine mandates, vaccine passports, vaccines, Worldometers.info

It’s approaching the status of a reliable rule of thumb: The longer the CCP Virus pandemic lasts, the weirder, and more unnecessarily harmful on balance, the actual and potential official responses get. The most important example nowadays has to do with the ever lengthening lists (a) of vaccine mandates and passports that have already been created by governments and businesses and universities around the country; and (b) increasingly irate calls for more – including demands that the unvaccinated be denied medical care or (seemingly more reasonably) affordable health insurance.

Given the large numbers of Americans remaining unvaccinated, and apparently likely to stay unvaccinated, the risks of mandates and passports per se should be obvious. Despite the U.S. economy’s strong recovery so far from the initial virus- and lockdowns-induce recession, new laws denying, say, employment to this population and barring them from patronizing businesses could deeply depress demand and output, and put the economy uncomfortably close to Spring, 2020 square one.

More troubling, even though these restrictions are still far from common, virus uncertainties generated by the highly contagious Delta variant seem to have already undercut hiring dramatically, and are widely forecast to weaken growth going forward. (See, e.g., here.)

But even if the virus was remotely as lethal or otherwise dangerous healthwise as Ebola or the Black Death (which it’s not), today’s insistence on universal vaccination and penalties for holdouts badly flunks the common sense test. The main reason: It completely ignores the existence of both natural and acquired immunity.

In fact, not only has the phenomenon of immunity not exactly been a secret to “The Science” – at least ever since disease began to be systematically studied. It’s likely reached gargantuan scale in the United States today. For example, a study just published in the respected science journal Nature and funded in part by the U.S. National Academy of Sciences contended that as of the end of last year, 103 million Americans had been infected with the virus. That’s about a third of the total population, and about five times the numbers of recorded cases at that point. Also during 2020, according to the reliable Worldometers.info website, just shy of 366,000 had succumbed to the disease.

Therefore, as of the end of 2020, more than 102 million Americans acquired immunity by recovering from infections that were either asymptomatic or too mild to report. And an unknown (but surely large) number of Americans were never infected to begin with because they were naturally immune.

All of these figures, of course, cover the period months before Delta arrived. Since it’s so infectious, the numbers of those with natural or acquired immunity nowadays must still be at least as big and possibly much bigger. The full vaccination of nearly 177 million Americans as of this latest CDC update of course complicates the estimation process, because so many with natural immunity undoubtedly have gotten such protection.

Another big complication: Vaccines have only been available since the very end of last year, and the numbers of fully vaccinated Americans took a while to become significant both because of roll-out delays and vaccine hesitancy. As a result, there’s not much data yet on whether either form of immunity is more protective than that offered by the jabs – which of course bears vitally on the core assumption behind the calls for vaccine mandates and the like.

After all, if either natural or acquired immunity is comparably effective to vaccination in warding off the virus (the study described here indicates they’re at worst not far off), or if both are, the case that the jabs are medically necessary for all the unvaccinated – either to safeguard the health of the unjabbed themselves, or to prevent them from spreading the malady – simply falls apart.

In addition, the paucity of great data is a problem in and of itself. Unquestionably, there could still major risks, especially long-term, to leaving the unvaccinated unvaxxed. But as noted, the risks of indiscriminate mandates and penalties are impressive as well. Consequently, what should be foremost on Americans’ minds when it comes to mandates-like questions is that in these circumstances, barreling ahead with sweeping measures and sanctions – many of whose effects, particuarly like joblessness and lost income, won’t take long to appear – would be the height of recklessness. As for those who would deny medical care to all of the unvaccinated on this fatally flawed basis (except those who can cite medical exemptions?), that seems the height of arrogance and self-righteousness – not to mention morally disgusting.

And in case you think that the common observation that the unvaccinated comprise nearly all recent CCP Virus-related deaths and hospitalizations clinches the case for mandates, these immunity points shred that idea, too. The problem is not with the claim of high correlation between unvaxxed status and mortality and  hospitalization. The problem is with assuming that a noteworthy share of these virus victims – or even the vast majority – had any form of immunity. In principle, large numbers of the unvaccinated immune could be coming down with dangerous virus infections anyway, or are likely to – and consequently should be coerced into getting jabbed and punished for refusing. But I haven’t seen that argument made; have you? And it’s surely missing in action because immunity is undeniably a thing.

So absent evidence to the contrary, the only reasonable conclusions are that getting the non-immune unvaxxed vaccinated should be a top priority, and that vaccination campaigns should be focused tightly on them. The immune unvaxxed, however, should be allowed to continue their lives as normal.

More than enough American live have been lost or ruined during the pandemic. Unless and until it’s discovered that all of the unvaccinated pose dangers to themselves and/or to others – whether because natural or acquired immunity is completely mythical, or is much weaker than the vaccines-produced variety – indiscriminate vaccine mandates, passports, and penalties will only needlessly lengthen the list of casualties.

(What’s Left of) Our Economy: U.S. Manufacturing Hiring’s Sloughing Off Delta – For Now

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aerospace, aircraft, aircraft engines, aircraft parts, appliances, automotive, Boeing, CCP Virus, China, coronavirus, COVID 19, Delta variant, electrical equipment, Employment, fabricated metal products, food products, healthcare goods, Jobs, logistics, machinery, manufacturing, medical equipment, metals, non-farm payrolls, pharmaceuticals, plastics and rubber products, PPE, private sector, semiconductor shortage, supply chains, tariffs, transportation, vaccines, {What's Left of) Our Economy

This morning’s official monthly U.S. jobs report (for August) brought a notable departure from recent trends. Athough the overall results were lousy (as total employment rose by just 235,000 during the month), manufacturing hiring soared by 37,000.

It’s true that nearly two-thirds of these gains (24,100) came from the automotive sector, which has been roiled recently by a shortage of semiconductors that’s wreaked havoc on the output of today’s increasingly electronics-stuffed vehicles. It’s also true that this progress might be snuffed out soon by the still widening spread of the CCP Virus’ highly infectious Delta variant and whatever new curbs on economic activity and consumer behavior it might keep prompting.

But it’s also true that domestic industry’s strong hiring in August came during a month when Delta had already become front-page news – which surely expains much of the much-weaker-than expected rise last month in overall non-farm payrolls (NFP – the U.S. jobs universe of the Labor Department that produces the employment data).

And it’s true as well that the major upward revision revealed to the July manufacturing jobs increase (all the way from 27,000 to 52,000 – the best such performance since last August’s 55,000) entailed much more than the vehicles and parts sectors (where the hiring advance was judged to be 10,500 instead of merely 800).

For example, July’s machinery jobs gains were upgraded from 6,800 to 9,100 (its strongest monthly result since last September’s 12,200); those for electrical equipment and appliances was estimated at 1,500 instead of 200; and employment in the plastics and rubber sectors was pegged at 2,300, not 300.

Despite its last excellent two months, U.S.-based manufacturing remained a job-creation laggard during the pandemic period as of August. But it became less of a laggard. Since the deep CCP Virus- and lockdowns-induced downturn of March and April, 2020, when manufacturers shed 1.385 million jobs, these companies have boosted employment by 1.007 million – erasing 72.71 percent of those losses. That share of regained jobs is up from the 68.74 percent level it reached in July.

That’s faster improvement than registered by the private sector, whose regained job percentage rose from 76.96 to 78.72, and by the total non-farm economy, where the advance rose from 74.50 percent to 76.60 percent.

Moreover, it’s important to remember that during the economy’s spring, 2020 woes, manufacturing employment suffered less than payrolls in the rest of the economy. Its job levels fell by 10.82 percent, compared with 16.46 percent for the private sector and 14.66 for the entire non-farm economy.

As with the July revisions, the list of significant manufacturing employment winners in August was hardly confined to the automotive industry. Among the major industry categories used by the U.S. government, fabricated metal products payrolls increased by 6,600 on month (the highest sequential boost since March’s 10,100); plastics and rubber products by 3,100 (its best such performance since February’s 4,500); and food manufacturing (1.600).

The biggest July jobs losers were electrical equipment and appliances (down 3,100, for its worst hiring month since January, when its payrolls fell by 3,400) and miscellaneous durable goods (a category containing personal protective equipment – PPE – and other medical supplies crucial for fighting the CCP Virus), whose 1,800 jobs lost were the worst such total since the entire economy’s spring, 2020 meltdown.

Also somewhat discouraging – job creation in the machinery sector, whose products are used elsewhere in manufacturing and throughout the rest of the economy, flatlined in August following its big 9,100 July spike.

The most detailed employment data for pandemic-related industries is one month behind those in the broader categories, but their July job-creation performance was decidedly mixed. In surgical appliances and supplies (the sector containing PPE and similar goods), May’s previously reported payroll decline of 900 is now judged to be a drop of 1,900, but June’s 500 jobs increase remained intact and was followed by an identical improvement in July. As a result, employment in this crucial national health security sector is now 9.22 percent above immediate pre-pandemic levels.

The overall pharmaceuticals and medicines industry saw hiring slow down notably in July – from a downwardly revised 2,300 in June to 400. May’s downwardly revised loss of 300 jobs stayed intact. These changes left payrolls in the sector 4.72 percent above February, 2020’s immediate pre-pandemic levels.

The story was little better in the pharmaceuticals subsector containing.vaccines. Its May and June employment gains are still judged to be 1,000 each, and no jobs at all were added in July. But its workforce is still 10.21 percent higher than just before the pandemic.

The July results showed that aircraft industry employment is still on a roller coaster, since Boeing is still struggling to overcome the manufacturing and safety issues it’s faced in recent years, along with the CCP Virus-related slump in business and leisure travel. May’s 5,500 monthly plunge in employment was unrevised in this morning’s figures, June’s 4,500 increase was upgraded to 4,700, but payrolls retreated again in July – by 1,500. Due to all these fluctuations, aircraft employment fell to 8.08 percent below its levels just before the pandemic arrived in force in the United States.

The aircraft engines and parts industries added 200 employees on month in July, but June’s previously reported increase of 500 was downgraded to 400. As a result, payrolls are down fully 14.80 percent since immediate pre-pandemic February, 2020.

It’s still possible that the Delta, or some other, CCP Virus variant will lower the boom on domestic manufacturing employment going forward – both because economic activity and therefore demand for manufactured goods will stagnate or drop not only in the United States, but in industry’s important foreign markets. Supply chain snags are no sure bet to clear up any time soon, either.

Nonetheless, U.S.-based manufacturing is still clearly benefiting from the Trump tariffs continued by President Biden that are pricing huge amounts of metals and Chinese-made goods out of the domestic market. Vast amounts of economic stimulus are still pouring into the American and foreign economies. And there remains tremendous pent-up demand among U.S. consumers and businesses alike, due to the lofty heights that household savings have reached and to clogged logistics systems. (A “hard” infrastructure bill will help U.S.-based manufacturers, too. But despite efforts to speed up the permitting process, regulations that can long delay the launch of new projects still may mean that the much of the new work will take months and even years before they’re “shovel ready.”)

And as I keep pointing out, those with the most skin in this game – domestic manufacturers themselves – keep professing optimism. (See, e.g., here and here.) That last consideration still tilts the balance toward manufacturing bullishness for me.

(What’s Left of) Our Economy: Even Pre-Delta, the CCP Virus Kept Roiling U.S. Trade Flows

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CCP Virus, China, coronavirus, COVID 19, Delta variant, exports, goods trade, imports, Made in Washington trade flows, manufacturing, non-oil goods trade deficit, services trade, supply chains, Taiwan, Trade, trade deficit, Wuhan virus, {What's Left of) Our Economy

Today’s official monthly U.S. trade figures (for July) revealed once again how the tumultuous stop-start nature of the nation’s CCP Virus-era economy keep greatly complicating figuring out its real health and whether it’s improving. That goes double for assessing whether the economy is returning to pre-virus normality.

As you may remember, last month I wrote that the June data “brought to an end for the time being the pattern this calendar year of the total U.S. deficit and goods shortfall statistics stabilizing on a monthly basis, along with the crucial non-oil goods gap data.” (The non-oil goods numbers represent that portion of U.S. trade flows most heaviy influenced by trade policy decisions – which is why I’ve dubbed this category “Made in Washington” trade.)

The reason: The U.S. Census Bureau, which tracks the trade flows, reported that the combined goods and services trade gap widened by 6.70 percent, to $75.75 billion in June – an all-time high that broke the $72.72 billion record set in March.

Today, however, the June total trade shortfall was revised down to $73.23 billion – a record till this morning, but 3.33 percent lower (a downgrade that’s really big by Census Bureau standards). Moreover, the July overall trade deficit came in at just $70.05 billion, which is right in line with the January-May average that so encouraged me last month.   

These fluctuations came mainly before the virus’ Delta variant struck the United States with full force, so such progress could vanish by next month. All the same, it’s reasonable to observe that the combined deficit shrunk for the best combination of reasons from a U.S. standpoint. Total goods and services exports climbed by 1.31 percent to $212.83 billion, the highest such level since May, 2019’s $213.97 billion. And overall imports dipped by 0.15 percent, from June’s slightly downwardly revised $283.31 billion to $282.88 billion – a total that’s still the second highest ever.

Even better, this deficit’s 4.34 percent sequential decline was achieved even though the long-time U.S. services trade surplus plunged by 11.77 percent on month. Of course, services have been the segment of the American and global economies that have been hit hardest by CCP Virus-related disruptions (think, especially, travel and transportation in general). But it’s still noteworthy that this July level was the lowest since September, 2012 (way before the pandemic), and the monthly decrease was the biggest since August, 2008’s 14.03 percent plummet, in the midst of the Great Recession that followed the global financial crisis.

At the same time, the services trade surplus number reported today for June ($20.03 billion) was revised up a mind-boggling 14.94 percent from the previously judged level of $17.43 billion. So that’s another reason to suspend judgment on any of these most recent virus-era economic data.

Keeping this (big) caveat in mind, the goods trade numbers released today were definitely good news. The chronic deficit in this portion of America’s trade flows (by far the biggest) sank sequentially by a healthy 5.93 percent, to $87.72 billion. That’s the lowest such total since April’s $87.09 billion, and the new June figure was revised only slightly higher, so this decline looks genuine so far.

In addition, goods exports in July, which increased by 1.83 percent on month, to $148.59 billion, set their fourth straight monthly record. July goods imports were off 1.20 perent sequentially from June’s all-time monthly high of $239.18 billion. But the $236.31 billion total was still the third highest ever.

The deficit reduction in that non-oil goods trade category was encouraging as well. At 6.91 percent, it was bigger than that for goods overall, and the greatest monthly fall-off since February, 2020’s 7.91 percent – when the original outbreak of the CCP Virus was still keeping much of China’s export-heavy economy at a standstill.

Of course, continuing snags in global supply chains are doubtless holding down U.S. exports, imports, and deficits, so they add up to another virus-related reason for caution in interpreting any single month’s trade data. But these disruptions have marked the entire CCP Virus period, so the July improvements can’t be written off entirely.

That goes for China-related trade flows as well. Especially important is that the July bilateral goods deficit of $28.65 billion was just 2.89 percent larger than June’s $27.84 billion, and represents the eight straight month when these results have stayed in the same neighborhood. That development sure looks like a sign that the Trump administration tariffs that President Biden has continued are still impeding China’s access to the U.S. market. So does the fact that, on year, the China goods trade shortfall has risen much more slowly (14.98 percent) than the total U.S. non-oil goods shortfall that’s its closest global proxy (21.39 percent).

The news on the U.S. trade manufacturing front was good, too – but only in relative terms. Despite the 3.12 percent monthly decrease in domestic industry’s huge, chronic trade deficit from last month’s record $114.06 billion total, the July figure of $110.50 billion was still the second biggest on record.

On month, manufacturing exports dipped by 1.90 percent, from $97.06 billion to $95.22 billion. But the much greater amount of imports was down 2.56 percent, from $211.11 billion to $205.72 billion.

Year-to-date, the manufacturing deficit is up fully 25.42 percent this year, to $732.62 billion, and is on track to shatter the annual record of $1.11277 trillion set just last year.

From January-to-July, 2020 to the same seven-month stretch this year, manufacturing exports have jumpe by 18.80 percent, to $642.16 billion. But the much greater amount of manufacturing imports has surged by 22.24 percent, to $1.37477 trillion.

In other notable July trade developments, the U.S. goods deficit with Taiwan, now the world’s leader in semiconductor manufacturing technology, hit its fourth straight monthly record ($3.62 billion), and the goods gap with Japan, another tech and manufacturing powerhouse, rocketed up month-to-month by 27.43 percent, to $6.29 billion. This total was the highest since last November’s $6.78 billion. And the Canada goods deficit retreated by 22.05 percent from a June total of $5.46 billion that was its highest since October, 2008.

Making News: Podcast of National Radio Interview on China’s Economy Now On-Line

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CCP Virus, China, coronavirus, COVID 19, Delta variant, Donald Trump, exports, globalization, Gordon G. Chang, logistics, Making News, supply chains, tariffs, The John Batchelor Show, Trade, trade war, transportation, Wuhan virus

I’m pleased to announce that the podcast is now on-line of my latest interview on John Batchelor’s nationally syndicated radio show. The segment, which aired last night, can be found here, and focused on China’s economic performance lately – which John, co-host Gordon G. Chang, and I all agreed is showing definite signs of struggling.

And keep checking in with RealityChek for news of upcoming media appearances and other developments.

Making News: Back on National Radio Tonight Analyzing China’s Economy

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CCP Virus, China, coronavirus, COVID 19, debt, Delta variant, exports, Gordon G. Chang, Making News, supply chains, tariffs, The John Batchelor Show, Trade, trade war, Wuhan virus

I’m pleased to report that I’m slated to return tonight to John Batchelor’s nationally syndicated radio show. Our subject:  how well or poorly China’s economy is handling a CCP Virus surge among its own population and in many countries that are major markets for its exports.

I’m not sure exactly when the segment is scheduled for tonight’s program, but John’s show is on the air week nights from 9 PM to 1 AM EST, and it’s always provocative and informative. You can listen live to our China conversation – including co-host Gordon G. Chang – at this link. And for those of you who can’t tune in, I’ll post a link to the podcast as soon as one’s available.

Also – keep checking in with RealityChek for news of upcoming media appearances and other developments

(What’s Left of) Our Economy: More Trade Normality Revealed in New GDP Figures – But for How Long?

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CCP Virus, coronavirus, COVID 19, Delta variant, exports, GDP, goods trade, gross domestic product, imports, inflation-adjusted growth, lockdowns, real exports, real GDP, real imports, real trade deficit, recession, recovery, services trade, Trade, trade deficit, Wuhan virus, {What's Left of) Our Economy

Last month, I reported that the trade highlights of the first official read on U.S. economic growth in the second quarter of this year showed signs that some form of normality was returning to the nation’s international trade flows after months of unprecedented pandemic-era fluctuations. This morning, the second government estimate of the second quarter gross domestic product (GDP) came out (next month we’ll see the final version – for now), and the signs of a new normality look even stronger.

Specifically, the sequential growth of America’s inflation-adjusted trade deficit during this period was even slower than the slowish rate presented in last month’s GDP release – and using the phrase “to a crawl” seems justified in describing the pace.

That initial estiimate revealed that the real trade gap’s quarterly widening had slowed from the sizzling 31.81 percent in the third quarter of last year, when the economy was roaring back from its brief but epic CCP Virus- and lockdown-induced crash dive to just 2.69 percent between this April and June (a strong growth period itself, but nothing compared with the initial recession rebound). Today, however, the after-inflation trade shortfall’s expansion came in at just 1.71 percent for the second quarter – when real growth itself clocked in at 6.40 percent on an annual basis, not the 6.35 percent estimated last month.

The new number for the second quarter’s price-adjusted trade deficit, $1.2471 billion annualized, remains astronomical by any reasonable standard. Not only is it still the biggest such figure in absolute terms. It’s the biggest such figure in relative terms – as a share of real GDP – where it still stands at 6.44 percent. And this revised trade deficit remains the fourth straight all-time high recorded. For some more perspective, the inflation-adjusted gap is also still 47.13 percent wider than where it stood in the fourth quarter of 2019 ($847.6 billion), just before the pandemic and its effect began weakening and distorting the economy.

More encouragingly, though, the new trade deficit result is a significant improvement over the $1.2590 trillion first reported. Also on the plus side, the after-inflation trade deficit’s sequential rise cut only 0.24 percentage points from the quarter’s 6.40 percent growth at an annual rate. That is, had the second quarter deficit stayed at its first quarter level, second quarter growth would have been 6.64 percent annualized – or 3.75 percent faster.

It all adds up to the trade deficit’s best such effect on real GDP change in absolute terms since the second quarter of 2020, when the deficit’s shrinkage prevented the nearly 36 percent pandemic-produced real GDP plunge from becoming slightly worse. By contrast, in the first quarter of this year, the inflation-adjusted trade shortfall’s increase cut the 6.14 percent annualized real growth figure by 1.56 percentage point. So had there been no sequential increase at all, that quarter’s price-adjusted growth would have been 7.70 percent at annual rates – a difference of fully 25.41 percent.

The manner in which the second quarter’s constant dollar trade gap improved over the initial read was good news as well, as after-inflation exports rose faster and their import counterparts climbed more slowly than reported last month.

Rather than growing by 1.47 percent sequentially during the second quarter, total after-inflation exports were judged to have advanced by 1.60 percent. At $2.2980 trillion annualized, though, they’re still 9.98 percent lower than in the fourth quarter of 2019 – the last full quarter before the CCP Virus’ arrival. As a result, the second quarter’s real export performance was an even greater improvement over the first quarter’s 0.73 percent dip than previously thought.

Combined goods and services imports were reported up by 1.64 percent between the first and second quarters, not 1.90 percent, as originally reported. This new figure also beat the first quarter’s 2.25 percent sequential real import increase.

At the same time, the new inflation-adjusted total import figure of $3.5547 trillion annualized still represents their second straight quarterly record, and such purchases from abroad are still 4.26 percent higher than their fourth quarter, 2019 level.

Turning to goods (the vast majority of U.S. trade flows), the second GDP read for the second quarter left standing their dubious record of a fourth straight all-time high trade deficit. But as with the overall trade deficit, the new figure of $1.4014 trillion annualized was a solid improvement from the previously reported $1.4610 trillion. And as a result, the second quarter number was only marginally (0.40 percent) worse than the first quarter figure, making clear a major slowdown in this indicator’s rise as well (from 20.40 percent during last year’s super-growth third quarter).

Unfortunately, the revised second quarter real service trade figures told a story that was especially gloomy even given this sector’s well known and disproportionate virus- and lockdown-induced woes. The long-running service trade surplus is now pegged at $149.5 billion for the April-through-June period. That’s a figure lower than the $151.2 billion previously reported, and the weakest quarterly result since the $161.7 billion recorded in the third quarter of 2010, when the recovery from the 2007-2008 financial crisis and Great Recession was in its earliest stages.

Also unfortunate – and frustrating: Whatever is shown in the final (for now) second quarter GDP report, the results will be pre-Delta variant. So although today’s data shows trade normalization to be even closer than previously thought, that next set could be of limited use at best in figuring out how long it’s going to last.

(What’s Left of) Our Economy: No Delta Effect on U.S. Manufacturing Growth In Sight. Yet.

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aerospace, aircraft, aircraft parts, appliances, automotive, Boeing, CCP Virus, coronavirus, COVID 19, Delta variant, electrical components, electrical equipment, fabricated metal products, Fed, Federal Reserve, inflation-adjusted growth, inflation-adjusted output, machinery, manufacturing, medical supplies, medicines, personal protective equipment, petroleum and coal products, pharmaceuticals, plastics, PPE, real growth, recovery, reopening, rubber, textiles, vaccines, {What's Left of) Our Economy

The after-inflation U.S. manufacturing production data reported today by the Federal Reserve revealed plenty of newsy developments. But my choice for biggest is the finding that, in price-adjusted terms, domestic manufacturers’ output finally nosed back above its last pre-CCP Virus (February, 2020) level.

The new number isn’t an all-time high – that came in December, 2007, just as the financial crisis was about to plunge the entire U.S. economy into its worst non-pandemic-related downturn since the Great Depression of the 1930s. As of this July, real manufacturing production is still 5.94 percent below that peak.

Measured in constant dollars, however, such output is now 1.15 percent greater than just before the virus arrived in the United States in force. Not much, and of course any Delta variant-prompted curbs on economic activity or extra caution in consumer behavior could wipe out this progress. But you know what they say about a journey of a thousand miles.

Had this milestone not been reached, I’d have led off this post by noting that although some really unusual seasonal factors in the volatile automotive sector definitely juiced the excellent July sequential output gain, U.S.-based industry outside automotive performed impressively during the month as well.

Specifically, as the Fed’s press release noted, the whopping 11.24 percent jump in the price-adjusted output of vehicles and parts contributed about half of overall manufacturing’s 1.39 percent growth. That automotive figure was the best monthly improvement since the 29.39 percent rocket ride the sector generated in July, 2020 – when the whole economy was staging its rebound from that spring’s deep but brief virus-induced recession. And that overall real on-month production advance was the best for manufacturing in general since the 3.39 percent achieved in March – earlier in the initial post-pandemic recovery.

But in July, the rest of domestic industry still expanded by a strong 0.70 percent after inflation – its best inflation-adjusted growth since the 3.31 percent also recorded in March.

The revisions in this morning’s Fed data for the entire manufacturing sector were mixed. June’s initially reported 0.05 percent decline is now judged to be a 0.10 percent increase, and April’s previously reported 0.39 percent drop now stands as a 0.21 percent decrease. But May’s last reported increase – upgraded slightly to a strong 0.92 percent – is now estimated at just 0.65 percent.

Looking at broad industry categories, the big real output July winners in domestic manufacturing’s ranks aside from automotive were electrical equipment, appliances, and components (up 2.31 percent); plastics and rubber products (up 2.02 percent); machinery (1.91 percent); the broad aerospace and miscellaneous transportation sector (think “Boeing”), which rose by 1.90 percent; textiles (up 1.67 percent); and miscellaneous durable goods, which includes but is hardly confined to many pandemic-related medical supplies (up 1.55 percent).

As I keep noting, good machinery growth is especially encouraging, since its goods are used both throughout manufacturing and the economy as a whole, and strong demand signals optimism among manufacturers about their future prospects – which tends to feed on itself and impart continued momentum to industry.

The list of significant losers was much shorter, with real fabricated metal products output 0.42 percent lower than June levels and petroleum and coal products shrinking by 0.60 percent.

Turning to narrower manufacturing categories that remain in the news, despite Boeing’s still serious manufacturing and safety problems, and ongoing CCP Virus-created weakness in air transport, inflation-adjusted production of aircraft and parts continued its strong recent run. June’s initially reported 5.24 percent monthly output surge was revised down to 3.57 percent. But that’s still excellent by any measure. And July saw production climb another 2.78 percent. As a result, real output in this sector is now 9.95 percent higher than it was just before the pandemic’s arrival in the United States in February, 2020.

Real output in the pharmaceuticals and medicines sector (which includes vaccines) grew by 0.77 percent sequentially in July, and its real output is now 11.35 percent greater than just before the pandemic. But those revisions!

June’s initially reported 0.89 percent increase is now judged to be a 0.34 percent decrease, and May’s previously downgraded 0.15 percent rise has now been upgraded all the way to 1.54 percent.

An even better July was registered by the vital medical equipment and supplies sector – which includes virus-fighting items like face masks, face masks, protective gowns, and ventilators. Monthly growth came in at 1.71 percent. But revisions here were puzzling, too.

June’s initially reported 0.99 percent sequential real production improvement is now seen as a major 1.54 percent falloff. And May’s monthly constant dollar growth, already upgraded from 0.19 percent to 1.18 percent, is now pegged at 1.86 percent.

I’m still optimistic about domestic manufacturing’s outlook, and that’s still based on domestic manufacturers’ own continued optimism – which as shown by the two major private sector monthly manufacturing surveys remained strong in July. (See here and here.)

But I also continue to view U.S. public health authorities’ judgment as suspect when it comes to the balance that needs to be struck between fighting the virus and keeping the economy satisfactorily open. So as long as new virus variants pose the threat of higher infection rates (though not at all necessarily of greater damage to Americans’ health), my own optimism has become more tempered.