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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.
RealityChek 