(What’s Left of) Our Economy: An Encouraging June Swoon for the U.S. Trade Deficit

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China, energy, exports, GDP, goods trade, gross domestic product, imports, Made in Washington trade deficit, manufacturing, non-oil goods deficit, recession, services trade, supply chain, Trade, trade deficit, Ukraine War, Zero Covid, {What's Left of) Our Economy

This morning’s official data (for June) show that U.S. trade was firing on practically all cylinders that month. In addition, the shrinkage in the combined goods and services deficit to the lowest level ($79.61 billion) since last December ($78.87 billion) was clearly attributable not only or even mainly to developments holding the nation’s imports down – ranging from a slowing in American economic growth (and therefore in most consumption) to the wounds China is inflicting on its export-heavy economy due to its insanely over-the-top Zero Covid policy to separate renewed backups at U.S. ports.

Instead, it’s also happening because many exports are up (to record levels), and that’s especally impressive because the dollar is so strong (which places U.S.-origin goods and services at price disadvantages all over the world, including in their home market) and because global growth is getting so weak (which tends to dampen demand for America’s offerings). And P.S. – these rising exports encompassed more than just the U.S. natural gas and other fossil fuels in such demand due to the Ukraine war and related sanctions on Russia.

The June figures reported one important exception, though: a monthly surge in the goods trade deficit with China to its highest level since November, 2018.

The June sequential drop in the overall trade deficit of 6.23 percent, from May’s $84.91 billion, was the third straight monthly decrease – a streak that hasn’t been seen since the second half of 2019, when the shortfall dropped sequentially six consecutive times – between June and November. Even better, the May total trade gap was revised down by a healthy 0.75 percent.

The deficit in goods trade – which dominates U.S. trade flows – tumbled 4.74 percent on month from $104.43 billion to $99.48 billion, its lowest level since last November. It, too, decreased sequentially for the third straight month, the first such stretch since December, 2019 through February, 2020 – just before the CCP Virus’ arrival in force began roiling and distorting the entire U.S. economy.

Meanwhile, the longstanding surplus in trade in services – which has been hit particularly hard by pandemic-related lockdowns and more cautious consumer behavior – advanced by 1.76 percent, from May’s upwardly revised (by 0.58 percent) $19.53 billion to $19.87 billion.

Combined goods and services exports hit their fifth straight monthly high in June, rising 1.67 percent from May’s upwardly revised $256.52 billion to $260.80 billion.

Energy goods exports were indeed way up – with natural gas overseas sales jumping by 26.51 percent, fuel oil exports increasing by 8.66 percent, and miscellaneous petroleum products climbing by 3.97 percent.

But they were far from the only significant export winners. For example, machinery and equipment exports soared by 13.78 percent on month in June; of foods, feeds, and beverages exports improved by 5.81 percent; and high tech goods’ foreign sales gained 4.51 percent.

In fact, goods exports overall also reached unprecedented heights for a fifth straight month in June, rising 1.97 percent sequentially from $179.51 billion to $183.04 billion.

As for services, their foreign sales hit their third straight all-time high, growing 0.97 percent on month, from $77.01 billion to $77.76 billion.

Overall imports, as mentioned, inched down sequentially – by 0.30 percent – in June, from $341.43 billion to $340.41 billion.

Another small monthly June decrease was registered by goods imports, which sagged by 0.50 percent, from $283.94 billion to $282.52 billion.

Only services imports broke this pattern: They set their own fifth consecutive record, increasing by 0.70 percent, from $57.49 billion to $57.89 billion.

The news in manufacturing trade was good, too – but only in comparison to industry’s recent alarming performance. The sector’s chronic, mammoth trade deficit was down 1.92 percent on month in June, from $132.60 billion to $130.05 billion. But this most recent total was still the third highest ever, after March’s $142.22 billion and the May figure.

Manufacturing joined the list of June export winners, as foreign sales increased sequentially from $112.15 billion to a new record $114.78 billion.

Manufactures imports inched up by mere 0.04 percent on month in June, from $244.75 billion to $244.83 billion. But this number was the second worst on record, after March’s $256.18 billion.

All told, at the statistical midway point of the year, the manufacturing trade deficit is running 22.13 percent ($756.53 billion vs $619.42 billion) ahead of last year’s record total. As a result, it’s all but certain that the United States in 2022 will rack up its fifth straight $1 trillion-plus manufacturing trade gap.

Year-to-date manufacturing exports are up 16.26 percent – from $548 billion to $637.12 billion. But the much greater amount of manufacturing imports has risen even faster – by 19.38 percent, from $1.16742 trillion to $1.39365 trillion.

Until very recently in the pandemic period (and its possible aftermath), as noted here, domestic manufacturing output and employment have held up remarkably well despite U.S.-based industry’s ballooning trade gap. The reason, as I pointed out here, is that Americans’ demand for manufactured goods has grown so strongly that domestic producers have been able to boost output even as imports flooded in much faster.

But with domestic manufacturing output decreasing in inflation-adjusted terms in both May and June, it looks like an economy-wide U.S. slowdown is weakening this demand, and that U.S.-based industry is finally paying a price for the share of its home market that it’s been losing.

The June China trade front news was even worse than that for manufacturing. The U.S. goods deficit with the People’s Republic soared by 17.13 percent sequentially, from $31.54 billion to $36.95 billion. That level is the highest since November, 2018’s $37.69 billion, and the increase the biggest since the 20.45 percent recorded in May, 2020 – when China and the United States were making recoveries from the first CCP Virus wave.

U.S. goods exports to China slumped by 5.22 percent, from $12.32 billion to $11.68 billion, while imports popped by 10.85 percent, from $43.86 billion to $48.63 billion – the highest total since last December’s $49.53 billion.

At least as important, this bilateral goods trade deficit is now up 27.51 percent on a year-to-date basis, as opposed to the 24.34 percent increase over the same period for its closest global proxy – the U.S. non-oil goods deficit.

For most of the time since the imposition of the first China tariffs imposed by former President Donald Trump in early 2018, this “Made in Washington” trade deficit (so named because by omitting services and oil trade, it tracks the U.S. trade flows most heavily influenced by U.S. trade policy) has been rising more slowly than the China goods deficit. Yet the gap, as noted in last month’s trade report, has been narrowing lately, and the June figures signal that it might be gone for the time being.

In general, though, the June trade report was a pleasant surprise given the currency and global growth headwinds mentioned above. Additional cause for some optimism:  The latest official release on the size of the U.S. economy in inflation-adjusted terms told much the same story of the trade gap narrowing for the “right reasons.”

But can the trade deficit keep falling due mainly to better exports, rather than following the typical slowdown and recession pattern of shrinking mainly due to the falling exports caused by weaker demand? In other words, can the falling deficit contribute to the quality of U.S. growth rather than simply reflect a feebler economy? Those are different questions altogether.

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(What’s Left of) Our Economy: A Rough January for U.S. Trade

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Advanced Technology Products, ATP, China, goods trade, Made in Washington trade deficit, manufacturing, non-oil goods deficit, Russia, services trade, tariffs, Trade, trade deficit, Ukraine, Ukraine invasion, Ukraine-Russia war, {What's Left of) Our Economy

As known by RealityChek readers, yesterday I decided to put off finishing my normal same-day report on the new official monthly U.S. trade figures in order to spotlight some critical (and oddly neglected) developments in the Ukraine war/crisis.

But the trade results (for January) are still worth examining in detail, even though (as always), they’re lagging indicators, and even though they of course pre-date all the likely disruption to the global economy and U.S. trade flows seemingly sure to stem from the Russian invasion of Ukraine and ensuing conflict.

Notably, the combined goods and services trade gap hit its second straight monthly record in January, rising 9.43 percent sequentially, to $89.69 billion. Moreover, the deterioration came on virtually all key fronts. And the December total was revised up by a big 1.52 percent, from $80.73 billion to $81.96 billion.

The January goods deficit increased, too and hit its third consecutive record. The increase was 6.99 percent, from an upwardly revised $101.75 billion to $108.86 billion.

Meanwhile, the longstanding U.S. surplus in services, which has been considerably depressed by a CCP Virus pandemic that’s hit this sector particularly hard the world over, sank by 4.40 percent, from $19.79 billion to $19.17 billion. The sequential decrease came to 3.13 percent, the decline was the first since August, and the downward revision of the initially reported December level was a huge 4.40 percent.

Total exports fell on month for the first time since September – by 1.73 percent, from an upwardly revised and all-time high of $228.35 billion to $224.40 billion.

Goods exports dipped, too, and also for the first time since September. The decline was 1.47 percent, from a downwardly revised $158.21 billion to $155.89 billion.

As for services exports, they sagged by 2.32 percent, from an upwardly revised $70.14 billion to $68.51 billion. This decline was the first since August.

Overall imports climbed by 1.04 percent, from an upwardly revised $310.30 billion to $314.09 billion, and they hit their sixth monthly record in a row.

Goods imports rose 1.84 percent, from an upwardly revised $259.96 billion to $264.75 billion, and achieved their fifth consecutive all-time high.

Services imports in January, however, decreased month-to-month for the second time in a row – which hasn’t happened since January and February, 2021. The fall-off was 2.01 percent, from an upwardly revised $50.35 billion to $49.34 billion. That latter total was the lowest since August, and the December revision was a substantial 2.38 percent.

As known by RealityChek regulars, non-oil goods trade is the vast portion of U.S. trade flows heavily affected by America’s trade deals and other trade policy decisions – hence my monicker “Made in Washington” trade. (Trade liberalization in services remains at an early stage globally, and oil is rarely on the table in national trade policy-making or diplomacy.)

The export-import gap in this category hit its third straight record in January, widening by 6.55 percent, from $100.56 billion to $107.15 billion.

Non-oil goods exports sank sequentially by 1.72 percent, from $138.38 billion to $136.00 billion, while imports set their fifth straight record. They increased by 1.76 percent, from $238.94 billion to $243.14 billion.

The nation’s oil trade gap soared on a relative basis in January – nearly quadrupling on a pre-inflation basis (the same gauge used for all the numbers in RealityChek trade reports unless specified otherwise). But the January total of $426 million was tiny in absolute terms.

The two big (but modest) exceptions to the January pattern of expanding trade shortfalls came in manufacturing and Advanced Technology Products (ATP).

The former’s chronic and mammoth trade deficit actually retreated for the second straight month in January. The decline was 1.32 percent – from December’s $122.65 billion to $121.03 billion. But the new total was still the third highest ever.

Manufacturing exports plunged by 7.80 percent on month in January, from $100.14 billion to a $92.33 billion level that was the lowest monthly total since August’s $97.13 billion.

Industry’s imports shrank by 4.23 percent in January, from a record $222.79 billion to $213.36 billion – the lowest since September’s $211.33 billion.

The decrease in the January ATP trade deficit was 1.77 percent, from $19.80 billion to $19.45 billion, and the drop was the second in a row – a first since last June and July.

ATP exports plummeted in January from a record $34.46 billion to $29.65 billion. That 13.96 percent drop was the biggest such figure since the 16.55 percent nosedive in January, 2020 – as the pandemic was raging through and locking down China. And the January figure was the lowest since August’s $29.49 billion.

ATP imports were off significantly, and from a record, too. The December-January swoon of 9.66 percent, from $54.36 billion to $49.11 billion, was the biggest since last February’s 13.09 percent, and brought these purchases to their lowest level since last August’s $45.56 billion.

The enormous U.S. goods deficit with China was up in January, but by just 0.61 percent sequentially, from $36.15 billion to $36.37 billion. The increase was much smaller than that for non-oil goods (the closest global proxy for U.S.-China trade) – and adds to the evidence (see most recently here) that the Trump China tariffs have helped rein in this trade gap. But the monthly level was the highest since December, 2018’s $36.60 billion.

U.S. goods exports to China, however, decreased in January for the third consecutive month – by 14.27 percent, from $13.38 billion to $11.47 billion. That drop, moreover – to the lowest level since last September’s $10.91 billion – illustrates again, how short the Trump Phase One trade deal with China keeps falling of its targets.

U.S. goods imports from China declined as well in January – by 3.41 percent, from $49.53 billion to $47.85 billion. That shrinkage was the first since last April, and brought the monthly total to its lowest level since September’s $47.41 billion.

Since, as noted, these January trade figures predate the invasion of Ukraine (as will February’s), future prospects are especially murky.  So the wisest course of action seems to be holding off on the prognostication and focusing on data as it comes out until some clarity emerges – at least until the next next global shock.   

(What’s Left of) Our Economy: U.S. Trade Figures Still on a (CCP Virus) Roller Coaster

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Biden, CCP Virus, China, consumers, coronavirus, COVID 19, Donald Trump, exports, Federal Reserve, goods trade, imports, Janet Yellen, manufacturing, non-oil goods deficit, recovery, stimulus, supply chains, tariffs, Trade, trade deficit, Wuhan virus, {What's Left of) Our Economy

Just as September’s official U.S. trade figures revealed numerous records and multi-month or year highs and lows (mainly of the bad kind), today’s October release reported its share of startling results – but mainly of the good kind. One black spot deserves mention right away, though – the country’s manufacturng trade deficit passed the $1 trillion mark for the fourth straight year. And we still have two data months left in 2021.

Still, the all-time monthly bests and similar extraordinary readings from October were nonetheless impressive. And combined with the September statistics, they make clear that the CCP Virus and government efforts to fight it are far from done distorting the U.S. and world economies. 

The chief records set were:

>Combined goods and services exports of $223.63 billion, which beat May, 2018’s previous record of $216.09 billion by 3.49 percent. Moreover, the 8.14 percent sequential improvement was the biggest since June, 2020’s 8.69 percent – which came during the strong national and global economic recoveries from the first wave of the CCP Virus and the short but sharp depression it caused.

>Total imports of $290.75 billion, which edged outthe previous month’s record of $288.23 billion by 1.06 percent.

>Goods exports, where the $158.73 billion figure exceeded the former record of $149.92 billion set in August by 5.87 percent. And the monthly increase of 11.07 percent was the biggest since March’s 10.18 percent.

>Goods imports of 242.67 billion, also the second straight all-time high, and a level that topped September’s $240.89 billion by 0.74 percent.

Another all-time best and worst came in non-oil goods trade. As known by RealityChek regulars, these trade flows deserve special attention, because they consist of exports and imports whose levels are significantly affected by trade agreements and other U.S. trade policy decisions (unlike trade in oil and services, where liberalization efforts are still at early stages at best).

The best? Non-oil goods exports climbed to an all-time high, with their $138.82 billion total standing 5.87 percent higher than the previous record of $131.12 billion set in August. Moreover, their monthly growth of 9.57 percent was the biggest such advance since the 10.65 percent increase of July, 2020 – also during that recovery from the first CCP Virus-related downturns.

The worst? Non-oil goods imports set their second straight record, coming in at $242.67 billion, or 0.74 percent higher than the September total of $240.89 billion.

And finally, when it comes to new records, imports of advanced technology products (ATP). Their $51.54 billion level also was a second straight, and surpassed September’s $50.50 billion by 2.06 percent.

But multi-month and even multi-year highs and lows abounded in the October trade report:

>The overall deficit plummeted from the record (and upwardly revised) $81.44 billion figure for September to $67.12 billion. The monthly total was the lowest since April’s $66.15 billion, and the sequential drop of 17.58 percent the greatest since April, 2015’s 18.16 percent.

>Similarly, in October, the goods deficit hit its lowest level ($83.95 billion) since November’s $86.23 billion, and the month-to-month decline of 14.33 percent (from September’s record $97.98 billion, was the biggest such drop since the 20.79 percent nosedive of February, 2009 – when the Great Recession following the global financial crisis was in its depths.

>The 11.40 percent monthly decrease in the non-oil goods deficit (the steepest fall-off since April, 2015’s 13.76 percent), brought this trade gap to its lowest level ($82.99 billion) since last November’s $85.73 billion.

October’s trade report contained some eye-popping numbers in U.S.-China goods trade, too.

>Goods exports to the People’s Republic shot up from $10.91 billion to a new record of $16.64 billion. Further, not only did this figure top the previous best (October, 2020’s $14.77 billion). But the 52.46 percent sequential jump was the biggest since the 71.04 percent recorded back in November, 1996 – when much smaller trade numbers made big percentage improvements much easier to generate.

>In addition, the U.S. goods trade deficit with China of $31.40 billion was the lowest since July’s $28.65 billion read, while the 13.99 percent monthly improvement was the biggest since the 25.19 percent figure reported for March, 2020 – when China had still shut down much of its economy due to the pandemic.

The China data also show that U.S. trade with the People’s Republic continue to perform better than U.S. trade in non-oil goods – the best global proxy for U.S. goods trade with China – and as a result, that the Trump (now Trump-Biden?) tariffs continue to work well.

For example, that 13.99 percent sequential narrowing of the U.S. goods trade gap with China in October was faster than the comparable 11.40 improvement in the non-oil goods deficit. That 52.46 percent monthly increase in goods exports to China, moreover, was nearly ten times greater than the 5.87 percent rise in non-oil goods exports.

The 1.30 percent increase in U.S. goods imports from China was nearly twice as fast as the 0.74 percent increase in America’s non-oil goods imports, but both absolute increases are modest.

And on a year-to-date basis, the U.S. goods deficit with China is still up less (13.67 percent) than the non-oil goods shortfall (16.73 percent).

On the down side, the U.S. manufacturing deficit did decline in October – by 3.32 percent, from a record $118.75 billion to $114.81 billion. But it remained astronomical by any reasonable standard.

Manufacturing exports improved on month by a healthy 10.99 percent, from $92.58 billion to $102.75 billion. But although manufacturing imports climbed by a much slower pace (2.95 percent, from $211.33 billion to $217.56 billion), they’re still more than twice as great.

Year-to-date, the 18.78 percent advance in manufacturing exports and the 19.56 percent rise in manufacturing imports has resulted in that trillion-dollar-plus manufacturing deficit ($1.083 trillion, to be precise). As of October, moreover, it’s running 18.26 percent ahead of last year’s pace.

The outlook for America’s trade flows? I’m still pretty sure that the deficits will keep rising in the near term – mainly because overall economic growth, and therefore consuming and importing are expected to stay so strong.  Longer term, though, uncertainties are still noteworthy and arguably could frustrate forecasts even more. 

After all, it’s still not clear how America’s and other governments will respond to the new Omicron variant ofthe virus (or whatever other strains come down the pike).

There’s the seemingly likely ebbing of the fiscal stimulus that’s boosted savings, and therefore purchasing and importing power, for the entire population during the pandemic period. Continued high inflation could start depressing consumer spending on its own – although less government stimulus all else equal should start restraining prices at some point.

Additionally, don’t forget the Federal Reserve, which has been prompted by faster-than-expected price increases to reduce the bond-buying program that’s provided another massive source of economic stimulus.  Is Treasury Secretary Janet Yellen right to be confident that consumer demand will stay strong nonetheless?  Beats me. 

Finally, it’s encouraging to read various claims that the global supply chain crisis is easing (e.g., here). But even if progress on this front continues and accelerates, new geopolitical threats to global commerce have emerged – especially rising tensions between China on the one hand, and the United States and most of China’s neighbors on the other, over the future of Taiwan and whether it gets decided peacefully.     

Since America’s economic growth is expected to be torrid in the final three months of this year (including, of course, October), I suspect that, despite all these questions and complications, the next few months of trade figures will worsen considerably (as I wrote last month). But the farther down the road I look, the cloudier my crystal ball gets

(What’s Left of) Our Economy: Now Oil’s Fueling the U.S. Trade Deficit’s Boom

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Advanced Technology Products, Biden, CCP Virus, China, climate change, COP26, coronavirus, COVID 19, exports, Glasgow, imports, lockdowns, manufacturing, non-oil goods deficit, oil, oil imports, oil trade, OPEC, supply chains, tariffs, Trade, trade deficit, Trump, UN Climate Change Conference, vaccine mandates, Wuhan virus, {What's Left of) Our Economy

So many records and multi-month or year highs and lows were revealed in this morning’s official report on U.S. trade flows (for September) that it’s tough to know where to begin. What caught my eye immediately, though, was a development that concerned a product that hasn’t generated much major trade news lately, but has produced quite a few headlines in the last few weeks alone: oil.

With the United Nations’ latest global climate change conference still underway in Glasgow, Scotland, and President Biden still asking members of the Organization of Petroleum Exporting Countries to boost their production to ease national and global energy shortages, it’s more than a little interesting that September saw America’s oil trade deficit balloon from $28 million (yes, with an “m”) in August to $3.38 billion (with a “b”).

That monthly total is the biggest since May 2019’s $3.98 billion and the $3.35 billion sequential worsening is the greatest such change for good or ill in absolute terms since the $3.52 billion improvement in this deficit in Dec., 2012 (when the monthly oil deficits were regularly some five or six times larger). It’s also the biggest increase in the oil trade shortfall since Jan., 2013 ($3.86 billion).

At least as interesting: On a year-to-date basis, the oil trade balance has shifted from a $13.98 billion surplus to a $6.84 billion deficit, mostly because oil imports are up 23.55 percent during this period.

The monthly spurt in the oil trade deficit weighed heavily on the overall September trade figures, accounting for 41.26 percent of the rise in the total deficit to a record $80.93 billion.

Moreover, not only was the September combined goods and services trade shortfall an all-time high. It beat the previous record (set in June) by a healthy (or sickly?) 10.52 percent, and the 11.52 percent monthly jump was the greatest such widening since the 19.87 percent recorded in July, 2020, when the U.S. economy was rebounding sharply from the short but deep downturn produced by the CCP Virus’ initial wave and the shutdowns and lockdowns mandated in response, along with major consumer caution.

September’s deficit resulted from both major trade flows moving in exactly the wrong way. Total imports set their third straight monthly record, increasing by 0.58 percent to $288.49 billion. And overall exports sank by 3.01 percent, to $207.56 billion. That total was the first monthly falloff since February and the biggest since the 19.96 percent plunge in April, 2020 – when the pandemic’s impact on the U.S. economy was peaking.

Still worse was the trade story in goods, where the $98.16 billion gap grew by 9.99 percent over the August total to a new record $98.16 billion. That figure broke the old mark (also set in June) by 5.25 percent, and the monthly increase was also the biggest since July, 2020 – when it rose by 12.20 percent.

Here, too, both exports and imports can be blamed. As with total exports, the former also decline for the first time since February, and the 4.71 percent sequential decrease to $142.71 billion was the steepest since the 25.10 percent crash dive suffered in pandemic-y April, 2020.

Goods imports, meanwhile, climbed by 0.78 percent to $240.86 billion – a new record , too.

Since manufacturing dominates U.S. goods trade, it’s not surprising that much of this September deterioration on the merchandise side came in industry. This sector saw its own longstanding and massive deficit hit a second straight monthly record, rising 1.60 percent to $118.75 billion.

Manufacturing exports dropped on month by 4.69 percent, from $97.13 billion to $92.58 billion. But the much greater amount of imports was down only 1.25 percent, from $214.041 billion to $211.33 billion.

These new records have pushed the 2021 manufacturing deficit so far to $968.25 billion – 22.52 percent bigger than last year’s January-through September number. So the full-year shortfall is sure to top $1 trillion for the fourth straight year – and by October.

Yet another all-time high was reported in an important manufacturing sub-sector – advanced technology products (ATP). The $50.50 billion worth of these goods imported by Americans in September set a monthy record, and one that broke the previous mark of $47.24 billion set in October, 2019, by 6.91 percent. Largely as a result, the ATP deficit surged sequentially by 22.82 percent in September, to $19.74 billion. The total was the biggest since last November’s $21.90 billion and the increase the fastest since May, 2020’s 22.98 percent – early during that US rebound following the CCP Virus’ first wave.

With many of these ATP goods coming from China, the import boom in this category understandably led to a big (15.01 percent) increase in the bilateral merchandise deficit. Indeed, the monthly rise, from $31.74 billion to $36.50 billion was the biggest since the shortfall’s near-doubling in April, 2020 – when the Chinese economy was bouncing back from its own broad virus-related shutdown – and the level was the highest since December, 2018’s $36.60 billion.

Goods imports from China hit $47.41 billion – their highest level since October, 2018’s $52.08 billion. And their 10.27 percent jump in September was the biggest such monthly change since the 18.23 percent increase of this past March, at the start of the U.S.’ last post-CCP Virus recovery.

The China goods deficit in September did worsen faster than its closest global proxy – the U.S. non-oil goods deficit (which widened by 6.47 percent). It’s still also growing more slowly on a year-to-date basis – 14.89 percent versus 18.60 percent, which indicates that the Trump tariffs continued by Mr. Biden are still restraining it. But the gap is narrowing.

What’s especially sobering about these and other recent trade figures is that the overall deficit rose by 7.50 percent between the second and third quarters of this year while the rate of economic growth fell by 40.31 percent.  That’s not supposed to happen. Clearly, virus- and lockdowns- and mandates- and supply chain-related disruptions are distorting normal economic patterns, but that’s a huge discrepancy nonetheless.  Worse (in this sense), the American economy’s expansion is so far expected to speed up again in the fourth quarter. Although trees aren’t supposed to grow to the sky, it seems a safe bet that the U.S. trade deficit going forward will do a pretty good imitation.     

(What’s Left of) Our Economy: Latest Figures Leave the U.S. Trade Picture as Foggy as Ever

Tags

aerospace, aircraft, Boeing, Canada, CCP Virus, China, coronavirus, COVID 19, Donald Trump, exports, goods trade, imports, Made in Washington trade deficit, manufacturing, non-oil goods deficit, reopening, services trade, tariffs, Trade, trade deficit, Wuhan virus, {What's Left of) Our Economy

With huge Chinese ports newly suffering the kind of congestion that’s clogged America’s West Coast ports for months, the U.S. and other national economies reopening at widely varying rates from their CCP Virus-induced shutdowns, and a worldwide shortage of semiconductors still undermining production throughout the world’s manufacturing industries, it’s tougher than ever to figure out what to make of the latest monthly U.S. trade figures (for May).

Oh, and I almost forgot: America’s long-time export and trade surplus standout, Boeing, keeps making bad news on the intertwined manufacturing and safety fronts, which means that its domestic and overseas sales could be depressed for months more.

So since they’re of such little help in figuring out the two biggest trade policy questions facing the country – about how different a post-pandemic trade normal may look from its pre-virus counterpart, and whether and how well the Trump tariffs are still working – it seems the best course to follow is simply reporting the highlights of the May report from the Census Bureau (and voicing some very tentative analyses where I have the courage).

These new data, which came out last Friday, revealed that the combined U.S. goods and services trade deficit increased by 3.14 percent between April and May – from $69.07 billion to $71.24 billion. The total was the second highest ever, trailing only March’s $75.03 billion.

The same general pattern characterized the goods trade gap, which widened by 2.76 percent (from $86.78 billion to $89.17 billion), also hit the second highest total on record, and also fell short of a March all-time high ($92.86 billion).

The best trade balance-related news came on the services side – which has been especialy hard hit by the virus and its effects, and where the surplus widened by 0.74 percent (from $17.80 billion to $17.93 billion) and improved for the first time since January.

Total exports advanced for the fourth straight month in May (by 0.64 percent, from $204.70 billion to $206.02 billion), and attained their highest level since December, 2019, just before the CCP Virus seems to have begun spreading from China.

Goods exports were something of a laggard – growing sequentially in May by just 0.30 percent (from $145.09 billion to $145.28 billion. More encouragingly, this level set its second straight monthly record.

Services exports fared better, up 1.47 percent on-month in May (from $59.62 billion to $60.49 billion) and producing their best monthly total since semi-pandemic-y March, 2020’s $60.62 billion.

But on all counts, U.S. imports rose faster.

The total import amount reached $277.26 billion in May, rising 1.27 percent from April’s $273.78 billion and representing the second highest total ever. Only the $277.69 billion figure from…yes…March has been higher.

Goods imports rose by a slower 1.18 percent, from $231.96 billion to $234.70 billion. And the total was another second highest, lagging only March’s $236.52 billion.

Despite their surplus growing, services imports rose considerably faster, by 1.77 percent, from $41.84 billion to $42.56 billion. That total was the highest since February, 2020 ($47.06 billion) – just before the virus’ arrival.

To a noteworthy degree, the worsening of the overall and goods deficits in May looks like a Boeing story. The narrowing of the U.S. civilian aircraft trade surplus (by $1.388 billion) accounted for nearly 64 percent of the increase deterioration in the overall trade balance, and 58.05 percent of the monthly growth of the goods trade gap.

Boeing’s troubles can’t be blamed for the entire year’s lofty deficit numbers. Far from it. In fact, between the January-to-May periods last year and this year, the $917 million shrinkage of the aircraft surplus has equalled less than one percent of the overall deficit’s increase during this time and just slightly more of the goods deficit. Aircraft trade numbers can be pretty volatile, too. But is the Boeing effect on the May data a portent of things to come? Stay tuned.

As known by RealityChek regulars, the best measure of how tariffs and similar trade policies are influencing U.S. trade flows is non-oil goods trade, which strips out oil (which hardly ever comes up in trade policymaking) and services (where global trade liberalization remains modest). And in this context, what jumps out right away from the May trade results (or what should jump out) is that this portion of the trade deficit rose much more slowly on month (0.33 percent) than the combined goods and services deficit (3.14 percent) or the total goods deficit (2.76 percent). And interestingly, without the poor civilian aircraft numbers, the “Made in Washington” trade deficit would have fallen month-to-month.

Moreover, on a January-to-May year-to-date basis, the non-oil goods trade deficit worsened just about half as much (by 23.99 percent) as the overall deficit (45.82 percent), and somewhat more slowly than the goods deficit (26.44 percent). Given that the Trump China tariffs alone of some $350 billion amounted to some 15.21 percent of total U.S. non-oil goods imports in 2019 (and remain in place today), that could be a sign that the levies have succeeded in restraining that deficit’s growth. When it comes to the Boeing effect, however, it’s negligible here, too.

May was an especially bad month for U.S. manufacturing trade, as its chronically huge shortfall jumped by 3.01 percent, from $103.60 billion to 106.72 billion. Huge as that sounds, it was only the fifth worst such figure ever. Exports increased by 0.91 percent while the much greater amount of imports climbed by 2.01 percent. Again, the Boeing effect generated much (nearly 45 percent) of the monthly deficit worsening but less than one percent of the $116.57 billion year-to-date difference.

May was also a bad month for China tariff supporters. The U.S. goods deficit with the PRC grew by 1.90 percent on month – much faster than the 0.33 percent increase in the non-oil goods deficit that’s its closest worldwide proxy. U.S. goods exports to the PRC advanced by a healthy 5.54 percent. May monthly imports grew much more slowly (3.04 percent), but they’re more than three times greater.

On a year-to-date basis, moreover, the Sino-American trade gap is 26.92 percent wider than last year, which stands not only as faster growth than that of the non-oil goods deficit (23.99 percent), but another sign that of tariff failure, as the China deficit by this measure has been rising faster non-oil goods deficit since March. Still, it’s difficult drawing firm conclusions, since the recovery of China’s export-heavy economy from its pandemic experience has been faster than that of most other (often also export-reliant) U.S. trade partners. Moreover, the difference between the growth rates of the two deficits has narrowed dramatically since March, so it’s possible that the pre-pandemic pattern – which reflected much better on the tariffs – is steadily returning.

And let’s end on an unexpected note: In May, the U.S. goods deficit with Canada surged by 56.98 percent sequentially, to $3.69 billion. That’s the highest level since December, 2019’s $4.95 billion and the fastest monthly increase since January’s 74.04 percent. This monthly rise, moreover, was driven by U.S. imports, which reached $29.08 billion – the biggest monthly total since October, 2014 ($30.72 billion). The monthly increase: a strong but hardly record breaking 5.86 percent. American goods exports to its northern neighbor, however, rose by just 1.09 percent, to $25.39 billion. And year-to-date, the U.S. goods deficit with Canada has more than doubled, soaring by a 108.93 percent.

(What’s Left of) Our Economy: Why Trump’s Solid Trade Record Survives the Lousy New U.S. Trade Report

Tags

automotive, Boeing, CCP Virus, cell phones, civilian aircraft, coronavirus, COVID 19, Made in Washington trade deficit, manufacturing, manufacturing trade deficit, non-oil goods deficit, shutdowns, tariffs, trade deficit, trade war, Trump, U.S. International Trade Commission, Wuhan virus, {What's Left of) Our Economy

This is how bad this morning’s official US. trade figures (for July) looked at first glance for folks like me – who value trade deficit reduction, and believe that trade policies like President Trump’s can make a real difference: When I began examining the data, even though I kept telling myself, “It’s only one month’s worth of statistics,” I scarcely knew what to despair about most.

Yet the “at first glance” point matters a lot. Because when you dig into the weeds, you’ll find plenty of evidence making clear that much of the deterioration had nothing to do with trade policy at all. And the evidence comes in two tables in these monthly trade reports on which I usually pass: Exhibit 7 and Exhibit 8. They cover U.S. exports and imports of goods “by End-Use Category and Commodity” and they provide the report’s most detailed picture of which areas of the economy have performed best and worst trade-wise during the month covered.

They’re not as detailed as those available from the U.S. International Trade Commission’s interactive search engine, but that database isn’t yet updated, so let’s go with what we have to begin seeing exactly where the biggest goods trade deficit increases came in July. (Goods trade, also called merchandise trade, makes up the bulk of U.S. trade flows, and it’s relatively unaffected by the policy decisions made by Washington – including by trade-minded Presidents like Donald Trump – mainly because international negotiations to deal with barriers in these sectors are still in pretty early stages)

Again, from the 30,000-foot level, the July results look terrible. The goods trade shortfall hit $80.91 billion – $9.26 billion, or 12.92 percent, higher than the June figure of $71.65 billion (which mercifully was revised down slightly). That increase proportionately is dwarfed by the record 31.60 jump of March, 1993. But that nearly 18-year old all-time high can be disregarded pretty easily, both because the law of small numbers is at work here (i.e., when you’re dealing with small absolute numbers, relatively small absolute changes can result in outsized percentage changes), and because back in those days, U.S. trade flows were heavily affected by oil trade – another sector of the economy rarely subject to trade policy decisions.

So what mainly accounted for that $9.26 billion merchandise import surge? First of all, we know that more than all of it ($9.94 billion) came in non-oil goods trade. As known by RealityChek regulars, those are the trade flows most heavily influenced by U.S. trade policy. So this increase in the “Made in Washington” deficit seems to reflect badly on decisions made in Washington. Drilling down a little deeper, manufacturing emerges as an even bigger culprit. Its $89.15 billion June trade gap ballooned to $104.63 billion in July – a rise of $15.48 billion. Not so incidentally, that manufacturing trade deficit is the worst ever in U.S. history, eclipsing the $101.65 billion recorded for October, 2018.

Nearly as interesting, though: China trade – where the President has been fighting a war – was not the biggest problem, as the manufacturing-dominated goods gap with the People’s Republic rose by just $3.22 billion. And neither the 11.35 percent on-month increase nor the $31.62 billion total goods gap was anywhere close to a record. 

So we’re back to manufacturing, and figuring out where the big deficit widening took place. Here’s where Exibits 7 and 8 matter.

What they tell us is that the monthly worsening of the merchandise trade deficit was highly concentrated in a handful of industries, and that these latest developments either have little or nothing to do with the Trump tariffs, or actually  demonstrate their effectiveness in widely overlooked ways.

Most relevant of all here is the automotive sector. Between June and July, the deficit in vehicles and parts combined increased by just under $3.20 billion. That represents more than a fifth of the sequential worsening of the manufacturing trade deficit, and nearly a third of the difference in the non-oil goods deficit. But the problem says little about the Trump trade policies, and a great deal about the reopening of U.S. automotive sector in late spring and early summer after the CCP Virus led to its almost complete shutdown in March and April.

From May through July, total American automotive production nearly tripled in real terms, according to the Federal Reserve’s industrial production reports. So it’s no surprise that since production in this industry is so globalized, and thus so many of its parts and materials (and the parts of the parts) are still imported, its trade deficit ballooned, too.

Then there are cell phones. Between June and July, the trade deficit here rose by just under $1.44 billion – 9.30 percent of the increase in the manufacturing deficit, and 14.48 percent of the problem in non-oil goods.

The cell phone category in the monthly trade releases also includes “other household goods” – one of the reasons I don’t love these numbers like I love those available from the International Trade Commission. But it’s reasonable to suppose that most of these goods are cell phones, and that most of these are coming from China – with which the Trump administration of course has been fighting a trade war.

As observed on RealityChek last month, however, Mr. Trump decided not to tariff them. So although cell phone imports indicate that the trade war is incomplete, they certainly don’t show that tariffs don’t work. If anything, they underscore what can happen when they’re missing.

A third major source of the deterioration shown in the new trade report is the civilian aircraft industry – where a surplus of $575 million in June became a $1.50 billion deficit in July. That’s a trade balance worsening of nearly $2.08 billion. In other words, this development alone accounts for 13.44 percent of the lousy July manufacturing trade results and 20.93 percent of the woes in non-oil goods trade flows.

Aircraft’s problems, however, have nothing to do with U.S. trade policy, and everything to with Boeing’s safety failures, which have led to big production shutdowns.

Add up the trade performances of these categories, and together they account for fully 43.38 percent of the manufacturing trade deficit’s increase between June and July, and a whopping 67.57 percent of the monthly rise in the non-oil deficit.

Combine these findings with a U.S. economic recovery that so far has been faster than the bouncebacks of many of its leading trade partners (except, notably, for export-heavy China) and the discouraging July trade figures don’t look nearly so discouraging.

Mission accomplished, then, for the Trump administration? Hardly? But the July trade report is far from a conclusive sign of failure, either. In fact, it leaves any fair-minded evaluation of the Trump trade record pretty much where it’s been since the CCP Virus arrived – deserving of solid grades before the bug arrived, and an incomplete during the completely abnormal times we’ve experienced since then.

(What’s Left of) Our Economy: New U.S. Trade Figures Reflect More Policy Noise, but Reveal More Underlying Improvement

Tags

China, exports, imports, Made in Washington trade deficit, manufacturing, non-oil goods deficit, tariffs, Trade, Trade Deficits, Trump, {What's Left of) Our Economy

As with last month’s numbers, this morning’s U.S. trade figures need to be taken with a big grain (or boulder?) of salt due to President Trump’s on-again, off-again tariff decisions with major foreign economies like Mexico and especially China. The big takeaway, IMO: These May data show that the portion of the nation’s trade deficit most affected by trade policy decisions is still growing much more slowly this year than it did last year – even though the pace of overall U.S. economic growth looks to be just slightly weaker. And that’s clearly good news if you share my belief that humongous and ballooning trade deficits are bad news for the economy.

Specifically, I’m talking about the non-oil goods trade deficit – the shortfall which strips out oil (which is rarely dealt with by trade policymakers anywhere) and services (where liberalization remains in its infancy). 

On a monthly basis, this trade gap (which I like to call the Made in Washington trade deficit) jumped by 3.02 percent in May – the biggest such rise since last December’s 9.07 percent, when importers were “front-running” – that is, scrambling to bring in foreign product ahead of threatened and imminent tariffs. And its $70.85 billion level was the highest since December’s $78.06 billion.

But for the first five months of this year, this deficit is up just 6.76 percent – much less than the 11.14 percent increase registered between January and May last year. And although the second quarter’s economic growth figures aren’t yet in, the gross domestic product (GDP) for the first half of this year seems set to expand at a rate that’s eminently respectable compared with last year’s first half.

In addition, the May figures show that the United States continues making progress in reducing its chronic and huge goods trade deficit with China – a major Trump goal.

As with the non-oil goods deficit overall, the U.S. merchandise shortfall with China grew sequentially in May – by 12.24 percent. The increase was the biggest in percentage terms since the 20.64 percent monthly surge last May, during the tariffs front-running period.

U.S. goods exports to the People’s Republic were up fully 14.92 percent on month in May – their best such performance since February’s 18.21 percent improvement. Yet the much larger amount of goods imports from China shot up by 12.85 percent – the biggest such increase since last May’s 14.78 percent.

Interestingly, though, given the seasonal factors that shape so much trade with China, this month’s May U.S. merchandise trade deficit with China was the lowest May total since 2016 – when overall American growth was much slower.

On the manufacturing trade front, another major Trump priority, the longstanding and huge monthly deficit climbed by 6.08 percent sequentially in May – from $86.78 billion to $92.06 billion. The May level is also the highest since January’s $89.13 billion.

On month, May manufacturing exports advanced by 5.30 percent, from $92.62 billion to $97.53 billion. But the much larger amount of imports increased by 5.67 percent, from $179.41 billion to $189.59 billion.

These new figures brought the year-to-date manufacturing trade deficit up to $416.23 billion in May – 5.28 percent higher than last year’s comparable total ($395.36 billion). Manufactures exports are actually down 1.93 percent this year so far while imports are up 1.33 percent.

Overall, the combined U.S. goods and services trade deficit widened by 8.39 percent on month in May – from an upwardly revised $51.22 billion to $55.52 billion. The May level was the highest and the sequential rise were both the highest since December ($60.81 billion and 13.35 percent, respectively).

On a January-May basis, the total trade deficit has worsened by 6.38 percent – a somewhat slower rate than the previous year’s 7.70 percent.

Total exports in May increased by 2.05 percent – their biggest such increase since last May’s 2.13 percent. But this improvement followed April’s 2.37 percent sequential decline – the worst such performance since January, 2016’s 2.66 percent.

Total imports, though, soared by 3.31 percent sequentially in May – from $257.64 billion to $266.16 billion. That total is the third highest ever (after last October’s $266.82 billion and last December’s $266.47 billion – during the tariffs front-running period). The monthly increase was the biggest since March, 2015’s 6.69 percent. But it also followed s big April monthly fall-off – 2.16 percent, the greatest since January’s 2.40 percent.

(What’s Left of) Our Economy: New Figures Show a Likely Post-Recession U.S. Trade Deficit High in Trump’s Year One

Tags

Census Bureau, China, exports, gross domestic product, high tech goods, imports, Made in Washington trade deficit, manufacturing, non-oil goods deficit, oil, recovery, Trade, trade deficit, Trump, {What's Left of) Our Economy

In November, the highest combined U.S. goods and services trade deficit ($50.50 billion) since January, 2012 ($50.98 billion) threatened to push the annual shortfall to its highest level since 2008 ($708.73 billion) – as the Great Recession got underway.

The 3.24 percent sequential increase in the overall trade deficit resulted in part from a 46.11 percent monthly jump in the oil gap and from the second straight all-time monthly figure for total imports ($250.72 billion versus October’s $244.70 billion); record monthly goods imports ($205.46 billion); a second straight record monthly high-tech goods deficit ($15.53 billion versus October’s $13.82 billion) which propelled the total to a new annual record ($100.33 billion) after only eleven months; and all-time highs in the monthly non-oil goods deficit in inflation-adjusted and pre-inflation terms ($66.66 billion versus $65.43 billion), and ($65.22 billion versus $64.99 billion). The former will probably help turn trade into a net U.S. growth killer in the fourth quarter of this year, and since both are largely driven by U.S. trade policy, their growth signals major continuing challenges for the Trump administration in this field.

The immense U.S. manufacturing trade deficit retreated on month from its October all-time high ($88.98 b). But at $86.20 billion, it still represented the second highest monthly total on record, and on an annual basis, this gap, too, seems likely to set its latest annual record. Not surprisingly, given its manufacturing-heavy nature, the enormous U.S. merchandise trade deficit with China looks headed to a new annual record as well.

Here are selected highlights of the latest monthly (November) trade balance figures released Friday morning by the Census Bureau:

>November’s combined U.S. goods and services trade deficit of ($50.50 billion), the highest such level since January, 2012’s $50.98 billion, greatly boosted the odds that the overall trade shortfall in 2017 will be the worst since 2008’s $708.73 billion – which was recorded as the Great Recession was spreading through the American economy.

>As of November, the total trade deficit of $513.58 billion was running 11.60 percent ahead of last year’s rate and is already higher than the full year total of $504.79 billion. The current post-2008 high for the overall trade shortfall is only $548.63 billion, reached in 2011.

>The November combined goods and services trade deficit total represented a 3.24 percent increase over the upwardly revised October figure of $48.91 billion.

>The monthly trade deficit has now risen sequentially three straight times after falling for four straight times.

>One big driver of the trade gap’s monthly rise was a 46.11 percent sequential jump in the U.S. oil trade deficit. The $1.51 billion increase, from just under $3.27 billion to just over $4.77 billion, accounted for nearly 95 percent of the trade shortfall’s monthly deterioration.

>But also contributing were several all-time deficit and import records in various components of overall U.S. trade flows.

>U.S. overall imports set their second straight monthly record in November, with the $250.72 billion topping October’s $244.7 billion by 2.46 percent.

>Monthly goods imports of $205.46 billion amounted to a record, too – surpassing the previous all-time high of $202.37 billion, set in April, 2014, by 1.53 percent.

>The record November deficit in high tech goods of $15.53 billion was a second straight all-time high as well. It eclipsed October’s $13.82 billion by 12.37 percent.

>In fact, this performance has already propelled this shortfall to a new annual record of $100.33 billion – 1.63 percent higher after 11 months than 2011’s 12-month total of $98.72 billion.

>New monthly deficit records were also set in the non-oil goods deficits on both an inflation-adjusted and pre-inflation-adjusted basis. Both reflect significantly reflect on the performance of U.S. trade policy, since they’re comprised of trade flows heavily influenced by trade agreements and similar decisions. And the continued deterioration of these “Made in Washington” trade deficits indicates that President Trump still faces major challenges in transforming America’s approach to the global economy.

>In addition, the inflation-adjusted figure is part of the calculation of the most closely-followed measure of America’s gross domestic product and its changes, and the November results suggest that trade will return to its typical role as an American economic growth killer in the fourth quarter of this year.

>In current dollars, the non-oil goods deficit rose sequentially to its second straight monthly record, with the November $65.22 billion figure standing 0.35 percent higher than October’s upwardly revised $64.99 billion.

>The real non-oil goods deficit also achieved its second straight monthly record in November, as it also increased by 0.35 percent on month to $65.66 billion. This trade shortfall is running 5.65 percent ahead of last year’s pace.

>As a result, the trade drag on the current economic recovery is likely to increase in the fourth quarter from the final third quarter figure of 16.36 percent – representing $459.9 billion worth of after-inflation growth lost since the recession officially ended in mid-2009.

>Interestingly, these developments were so adverse that they more than offset the effects of several record export totals.

>Specifically, a 2.27 percent sequential rise in total exports in November brought them to a new monthly record of $200.22 billion – fractionally higher than the previous all-time best of $200.14 billion from October, 2014.

>Moreover, the services sector set its second straight monthly exports record, with the November figure of $65.66 billion inching past October’s $65.60 billion.

>In addition, goods exports in November rose to their best level ($134.57 billion) since November, 2014’s $135.75 billion.

>The huge and longstanding U.S. manufacturing trade deficit retreated in November from the all-time record it set in October ($88.98 billion). But at $86.20 billion, it still represented the second highest total on record.

>Manufacturing exports fell 1.02 percent on month in November, to $92.88 billion. Manufacturing imports dropped nearly twice as fast – by 2.05 percent, to $179.08 billion.

>Year-to-date, the manufacturing trade deficit is running 6.85 percent seven percent ahead of 2016’s record total of $863.07 billion – which was an all-time high.

>On year between January and November, manufacturing exports have increased by 4.19 percent, and imports have risen by 5.45 percent.

>The massive, longstanding U.S. merchandise trade deficit with China rose by only 0.57 percent month-to-month in November. But the $35.43 billion figure did represent the third highest monthly total on record.

>U.S. goods imports from China in November fell by a mere 0.10 percent from October’s all-time high of $48.20 billion to $48.15 billion.

>U.S. goods exports to China’s fast-growing economy decreased much faster – by 1.93 percent, to $12.72 billion.

>Year-to-date, the China goods deficit is running 7.86 percent ahead of last year’s total – and 1.50 percent ahead of the 2015 rate, which eventually set the current annual record.

(What’s Left of) Our Economy: A Comeback for the U.S. Trade Deficit – & Most (but not all!) of the Usual Suspects

Tags

Canada, China, energy, exports, GDP, Germany, gross domestic product, high tech goods, imports, Korea, Made in Washington trade deficit, manufactures, Mexico, NAFTA, non-oil goods deficit, North American Free Trade Agreement, oil, recovery, Trade, trade deficit, Trump, {What's Left of) Our Economy

America’s goods and services trade deficit recorded a near-double-digit sequential increase in January to hit $48.49 billion. That monthly total was the highest since March, 2012’s $50.22 billion. Combined goods and services exports inched up sequentially to $192.04 billion – their best performance since December, 2014’s $197.46 billion. But total imports grew some four times faster, to $240.59 billion. That total also was the highest since December, 2014 ($241.21 billion).

America’s pre-inflation oil trade deficit spurred much of the total trade gap’s January rise, soaring by nearly 25 percent sequentially to $7.56 billion – the highest level since July, 2015’s $8.01 billion. An 18.37 percent surge in imports to $16.87 billion, the highest total since January, 2015’s $19.63 billion produced much of this result. But the huge, chronic U.S. manufacturing trade deficit also shot up in January – from $69.52 billion to $75.54 billion. And following a record December monthly plunge in its volatile trade balance, the shortfall in high tech goods more than doubled in January, to $8.46 billion.

The massive and longstanding American merchandise deficit with China rebounded by nearly 13 percent in January from a nine-month low to reach $31.30 billion. The main culprit – the biggest decrease in monthly goods exports to China (13.37 percent) since last January’s 18.87 percent plunge. The goods gap with NAFTA partner Canada jumped by more than 68 percent on month, to $3.62 billion. And the merchandise deficit with free trade partner Korea more than doubled, from a nearly two-year low, to $2.59 billion. Yet the U.S. merchandise deficit with Germany — whose big global surpluses have just been targeted by the Trump administration — hit its lowest level ($4.88 billion) since last February ($4.51 billion), and that with Mexico shrank by just over 10 percent, to $3.95 billion. That was its lowest level since July, 2015 ($3.71 billion).

Most troubling, however, the Made in Washington trade deficit – the gap in goods other than oil that is heavily affected by U.S. trade policy – rose by more than five percent on month to hit $61.43 billion. That total, the highest since March, 2015’s $61.90 billion, signals that the trade drag on the already sluggish current American economic recovery will increase further in the first quarter of this year.

Here are selected highlights of the latest monthly (January) trade balance figures released this morning by the Census Bureau:

>In January, the U.S. trade deficit hit $48.49 billion – its highest monthly level since March, 2012’s $50.22 billion.

>The January total represented a 9.56 percent increase over the December total, which was adjusted only fractionally downward, to $44.26 billion.

>Combined goods and services exports of $192.09 billion represented a 0.56 percent increase over the upwardly revised December figure of $191.01 billion – and the highest monthly result since December, 2014’s $197.46 billion total.

>But combined goods and services imports grew by 2.26 percent in January, from an upwardly revised December level of $225.27 billion to $240.59 billion. That total was also the highest since December, 2014 ($241.21 billion).

>Much of the January trade deficit increase resulted from a 24.72 percent monthly pop in the current-dollar U.S. oil trade deficit. The $7.56 billion total was the highest since July, 2015’s $8.01 billion.

>Pre-inflation oil exports increased by 13.68 percent on month in January, from $8.20 billion to $9.32 billion. But imports surged by 18.37 percent – from $14.26 billion to $16.87 billion. That was their highest total since January, 2015’s $19.63 billion.

>But January’s poor U.S. trade performance was also fueled by an 8.66 percent increase in the massive and chronic manufacturing trade gap, from $69.52 billion to $755.54 billion.

>Manufactures exports sank by 7.02 percent sequentially in January, from $89.36 billion to $83.09 billion. But manufactures imports dipped by only 0.16 percent, from $158.88 billion to $158.62 billion.

>Within manufacturing, the high tech goods deficit worsened dramatically in January, as the monthly shortfall rebounded from a record (71.78 percent) sequential drop in December, to $3.82 billion, to $8.46 billion – i.e., a more-than-doubling.

>U.S. high tech goods exports plummeted in January by 18.93 percent – from $32.18 billion in December to $26.06 billion. Imports, however, declined by only 4.11 percent, from $36.00 billion to $34.52 billion.

>The wider January trade deficits in manufacturing and high tech goods were no doubt linked to the 12.78 percent increase in the American merchandise trade shortfall with China – from $27.76 billion in December (the lowest such figure since last April’s $24.31 billion) to $31.30 billion.

>U.S. goods exports to China fell by 13.37 percent on month in January – from $11.63 billion to $10.07 billion. That was the biggest sequential decrease since last January’s 18.87 percent. U.S. goods imports from China hit $41.38 billion – a 5.07 percent rise from December’s $39.38 billion.

>America’s merchandise deficit with Canada skyrocketed in January by 68.37 percent, from $2.15 billion in December to $3.62 billion. U.S. goods exports to this North American Free Trade Agreement (NAFTA) partner fell 2.35 percent on month, but imports advanced by 4.17 percent.

>The goods deficit with bilateral free trade partner Korea more than doubled in January, from $1.20 billion (the lowest such total since February, 2014’s $1.08 billion) to $2.59 billion. America’s merchandise exports to Korea ticked up by 0.27 percent on month, but its merchandise imports were up 8.91 percent.

>Since the bilateral trade deal went into effect in March, 2012, the U.S. merchandise deficit with Korea has roughly quintupled on a monthly basis.

>By contrast, even though the Trump administration has recently criticized Germany’s burgeoning global trade surpluses, the American merchandise deficit with that country actually shrank on month by 8.72 percent to $4.88 billion.  That was its lowest level since February, 2014 ($4.51 billion).

>Similarly, the United States’ merchandise deficit with its other NAFTA partner, Mexico, fell by 10.13 percent, from $4.39 billion to $3.95 billion. That’s its lowest level since July, 2015 ($3.71 billion).

>At the same time, the 5.21 percent monthly rise in the January real non-oil U.S. goods deficit of $61.43 billion – the biggest such total since March, 2015’s $61.90 billion – spells trouble for American economic growth in the first quarter of this year. This Made in Washington deficit – which strips out areas like energy and services, which are only slightly impacted by American trade policies – influences the most closely followed gross domestic product figures, which are inflation-adjusted.

>Although the final fourth quarter 2016 results are not yet available, preliminary figures so far show that the strong growth of this policy-shaped trade deficit has slowed the cumulative pace of the nation’s historically weak economic recovery by fully 20.56 percent – or $434.78 billion.

(What’s Left of) Our Economy: No News isn’t Good News on Trade and U.S. Economic Growth

Tags

exports, GDP, goods, gross domestic product, imports, inflation, Made in Washington trade deficit, non-oil goods deficit, real GDP, real trade deficit, recovery, services, Trade, trade deficit, {What's Left of) Our Economy

The government’s second figures for fourth quarter and full-year 2016 gross domestic product (GDP) confirmed the dismal trade results reported in last month’s initial reading. The real annualized trade deficit still recorded its biggest relatively quarterly jump (14.82 percent) since the second quarter of 2010 (14.90 percent). Consequently, as reported in the advance release, the cumulative trade drag on the current weak U.S. economic recovery shot up from 6.57 percent to 10.13 percent.

Trade’s absolute bite from annualized quarterly real growth remained the biggest (1.70 percentage points from 1.84 percent annualized growth) since the second quarter of 2010 (1.77 percentage points from 3.86 percent annualized growth) – though it dipped in absolute terms. On an annual basis, though, the trade drag on constant-dollar American growth still came in much lower than in 2015 – falling from 0.71 percentage points out of a 2.60 percent improvement o 0.12 percentage points out of a 1.60 percent uptick.

The fourth quarter price-adjusted annualized trade deficit stayed at $599.6 billion – still the biggest since the $623.7 billion mark of the first quarter of 2008. The annual real trade shortfall of $561.6 billion was unrevised, too, and remained the greatest since 2007’s $712.6 billion. Both previous peaks were reached as the Great Recession was breaking out.

The new GDP figures revealed new real export records for services ($685.5 billion annualized) on a quarterly basis and for combined goods and services exports ($2.1288 trillion) on an annual basis. Both results were upgraded fractionally. New records also remained in place for quarterly overall imports ($2.7395 trillion annualized – a slight upward revision), and quarterly goods imports ($2.2533 trillion annualized – a small downgrade). The same was true for annual overall imports (revised up slightly to $2.6904 trillion), goods imports (downgraded fractionally to $2.2097 trillion), and services imports (upgraded to $478.3 billion).

Here are the trade highlights from this morning’s GDP report:

>On the trade front, no news was anything but good news in the U.S. government’s second reading for fourth quarter and full-year 2016 inflation-adjusted gross domestic product (GDP) growth. The new release confirmed last month’s advance report showing that a major jump in the quarterly real trade deficit greatly boosted trade’s drag on the nation’s already feeble economic recovery.

>The revised GDP numbers revealed that the inflation-adjusted trade deficit for goods and services for the fourth quarter stayed at $599.6 billion at an annual rate, which still represented a 14.82 percent on quarter surge, from $522.2 billion. Moreover, this largest sequential percentage increase since the second quarter of 2010 (14.90 percent) kept the trade bite from quarterly growth (1.70 percentage points out of a 1.84 percent annualized real GDP increase) as the deepest since that second quarter of 2010 (1.77 percentage points out of 3.86 percent annualized growth). And since the overall after-inflation sequential GDP improvement was revised down slightly from 1.86 percent, the trade drag worsened slightly.

>In consequence, the new figures showed that the trade subtraction from cumulative real GDP growth during this historically feeble American economic recovery still rose from 6.57 percent to 10.13 percent sequentially.

>The rise in the Made in Washington U.S. trade deficit has slashed recovery-era growth to a much greater extent. This gauge measures trade flows heavily influenced by U.S. trade policies – of goods excluding oil (which doesn’t tend to come up in trade negotiations and where American net imports have dropped dramatically) and services (where trade liberalization remains limited).

>The latest full-year 2016 figures show that this Made in Washington shortfall has cut cumulative inflation-adjusted growth during the recovery by 18.86 percent, or $461.78 billion.

>On an annual basis, however, the GDP report left unrevised a drop in the trade drag on growth – from 0.71 percentage points from 2.60 percent inflation-adjusted growth in 2015 to 0.12 points out of a 1.60 percent real GDP increase last year.

>The real trade deficit also grew in 2016 at a much slower pace (four percent) than in the fourth quarter. Nonetheless, at the same $561.6 billion level, it remained the greatest annual price-adjusted trade gap since 2007 ($712.6 billion).

>The new GDP report confirmed its predecessor’s finding that the real trade deficit also rose proportionately in the fourth quarter of 2016 – to its highest share of after-inflation GDP (3.57 percent) since the fourth quarter of 2008 (3.64 percent).

>Similarly, today’s GDP numbers reiterated the rise in the full-year 2016 constant-dollar trade gap as a share of real GDP to its highest level (3.37 percent) since 2008 (3.76 percent).

>As a result, the real trade deficit’s absolute sequential increase in the fourth quarter of 2016 ($77.4 billion) stayed the strongest such rise since these figures began being tabulated by the Commerce Department in 1999.

>The new GDP figures slightly upgraded fourth quarter services exports – from a record $685.4 billion to $685.5 billion. The sequential rate of increase inched up from 0.22 percent to 0.23 percent.

>The annual combined goods and services exports figure was upgraded a bit, too – from $2.1284 trillion (another all-time high) to $2.1288 trillion. And the 2016 rate of increase came in at 0.39 percent, rather than 0.37 percent.

>Yet the slew of import records reported in the advance GDP estimate rose fractionally as well.

>In the fourth quarter, overall imports are now estimated to have hit $2.7395 trillion annualized, as opposed to $2.7380 trillion. That 2.06 percent increase slightly exceeds the two percent figure reported previously.

>As for fourth quarter price-adjusted goods imports, where the advance report pegged them at a record $2.2548 trillion annualized (up 2.62 percent), the revised figures are $2.2533 trillion (still an all-time high) and 2.55 percent, respectively. 

>During full-year 2016, overall real imports were initially reported at $2.6901 trillion – up 1.11 percent on year. Both numbers were revised slightly higher – to $2.6904 trillion and 1.12 percent, respectively.

>Real goods imports numbers for full-year 2016, however, were downgraded a bit. Originally reported at $2.2101 trillion, or up 0.73 percent over 2015 levels, they are now judged to have been $2.2097 trillion – reflecting a 0.71 percent rise.

>Upward revisions were more substantial for inflation-adjusted services imports in 2016. Rather than rising 2.84 percent on year, to $477.6 billion, they are now estimated to have grown by 2.99 percent, to a new record $478.3 billion.