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

Tags

Advanced Technology Products, ATP, Biden, Buy American, Canada, CCP Virus, China, Donald Trump, European Union, exports, Federal Reserve, goods trade, imports, India, Inflation Reduction Act, infrastructure, Japan, Made in Washington trade flows, manufacturing, monetary policy, non-oil goods trade, semiconductors, services trade, stimulus, Taiwan, tariffs, Trade, trade deficit, Ukraine War, Zero Covid, {What's Left of) Our Economy

Pretty calm on the surface, pretty turbulent underneath. That’s a good way to look at yesterday’s official release of the U.S. trade figures for January. Many of the broadest trade balance figures moved little from their December levels, but the details revealed many multi-month and even multi-year highs, lows, and changes – along with one all-time high (the goods deficit with India).

The combined goods and services deficit most strongly conveyed the impression of relatively calm trade waters. It rose sequentially for the second straight month, but only by 1.61 percent, from a downwardly revised $67.21 billion to $68.29 billion.

The trade shortfall in goods narrowed, but by even less – 0.69 percent, from an upwardly revised $90.71 billion to $90.09 billion.

More volatility was displayed by the services trade surplus. It sank for the first time in two months, from upwardly revised $23.50 billion (its highest monthly total since December, 2019’s $24.56 billion – just before the CCP Virs’ arrival stateside) to $21.80 billion. Moreover, this shrinkage (7.26 percent) was the greatest since last May’s 11.05 percent.

Meanwhile, total U.S. exports in January expanded sequentially for the first time since August. And the the 3.41 percent rise, from a downwardly revised $249.00 billion to $257.50 billion was the biggest since April’s 3.62 percent.

Goods exports in January also registered their first monthly increase since August, with the 6.02 percent improvement (from a downwardly revised $167.69 billion to $177.79 billion) the biggest since October, 2021’s 9.09 percent.

Services exports dipped on month in January, from a downwardly revised $81.32 billion to $79.71 billion. And the 1.98 percent decrease was the biggest since last January’s 3.05 percent. But the December total was the highest on record, and the seventh straight all-time high over the preceding nine months, so January could be a mere bump in the services export recovery road.

On the import side, total U.S. purchases from abroad advanced for the second straight month in January, with the 3.03 percent increase (from a downwardly revised $316.21 billion to $325.79 billion standing as the biggest since last March’s 9.64 percent.

Goods imports were up, too – from a downwardly revised $258.40 billion to $267.88 billion. The climb was the second straight, too, and its 3.67 percent growth rate also the biggest since March (11.00 percent).

Services imports in January were up for the first time since September, but by a mere 0.17 percent, from a downwardly revised $57.81 billlion to $57.91 billion.

Also changing minimally in January – the non-oil goods deficit (which RealityChek regulars know can be considered the Made in Washington trade deficit, since non-oil goods are the trade flows most heavily influenced by U.S. trade agreements and other trade policy decision. The 0.32 percent month-to-month decline brought this trade shortfall from $91.97 billion to $91.68 billion.

Since Made in Washington trade is the closest global proxy to U.S.-China goods trade, comparing trends in the two can indicate the effectiveness of the Trump-Biden China tariffs, which cover hundreds of billions of dollars worth of Chinese products aimed at the U.S. maket.

In January, the huge, longstanding U.S. goods trade gap with China widened by 7.01 percent, from $23.51 billion to $25.16 billion. That third straight increase contrasts sharply with the small dip in the non-oil goods deficit – apparently strengthening the China tariffs critics’ case.

Yet on a January-January basis, the China deficit is down much more (30.82 percent) than its non-oil goods counterpart (14.07 percent). The discrepancy, moreover, looks too great to explain simply by citing China’s insanely over-the-top and economy-crushing Zero Covid policies. So the tariffs look to be significantly curbing U.S. China goods trade, too.

U.S. goods exports to China fell for the third straight month in January – by 5.05 percent, from $13.79 billion to $13.09 billion.

America’s goods imports from China increased in January for the second straight month – by 2.55 percent, from $37.30 billion to $38.25 billion.

Revealingly, however, on that longer-term January-to-January basis, these purchases are off by 20.50 percent (from $47.85 billion). The non-oil goods import figure has actually inched up by just 0.71 percent – which also strengthens the China tariffs case.

The even larger, and also longstanding, manufacturing trade deficit resumed worsened in January, rising for the first time in three months. The 2.83 percent sequential increase brought the figure from $113.61 billion – the lowest figure, though, since last February’s $106.49 billion.

Manufacturing exports declined by 3.01 percent, from $105.71 billion to $102.52 billion – the weakest such performance since last February’s $94.55 billion.

The much greater value of manufacturing imports rose fractionally, from $219.31 billlion to $219.36 billion – also near the lows of the past year.

In advanced technology products (ATP), the trade gap narrowed by 11.36 percent in January, from $18.45 billion to $16.35 billion. The contraction was the third in a row, and pushed this deficit down to its lowest level since last February’s $13.42 billion.

ATP exports were down 8.78 percent, from $35.16 billion to $32.07 billion – their lowest level since last May’s $31.25 billion. And ATP imports sank by 9.68 percent, from $53.60 billion to a $48.42 billion total that was the smallest since last February’s $42.44 billion.

Big January moves took place in U.S. goods trade with major foreign economies, though much of this commerce often varies wildly from month to month.

The goods deficit with Canada, America’s biggest trade partner, jumped by 39.02 percent on month in January, from $5.09 billion to $7.07 billion. The increase was the second straight, the new total the highest since last July’s $8.47 billion, and the growth rate the fastest since last March’s 47.61 percent.

But the goods shortfall with the European Union decreased by 10.83 percent, from $18.36 billion to $16.37 billion. The drop was the third straight, the new total the lowet since last September’s $14.44 billion, and the shrinkage the fastest since last July’s 19.97 percent.

For volatility, it’s tough to beat U.S. goods trade with Switzerland. In January, the deficit plummeted 42.07 percent, from $2.28 billion to $1.32 billion. But that nosedive followed a 77.84 percent surge in December and one of nearly 1,200 percent in November (from a $99.9 million level that was the lowest since May, 2014’s $45.3 million).

Also dramatically up and down have been the goods trade shortfalls with Japan and Taiwan. For the former, the deficit plunged by 30.33 percent in January – from $7.09 billion to $4.94 billion. But that drop followed a 20.58 percent increase in December to the highest level since April, 2019’s $7.35 billion.

The Taiwan goods deficit soared by 52.44 percent in January, from $2.80 billion to $3.68 billion. But this rise followed a 33.65 percent December drop that was the biggest since the 43.18 percent of February, 2020 – when the CCP Virus was shutting down the economy of China, a key link of the supply chains of many of the island’s export-oriented manufacturers.

Finally, the goods deficit with India skyrocketed by 106.55 percent in January, from $2.41 billion to that record $4.99 billion. That total surpassed the $4.44 billion shortfall the United States ran up with India last May, but the more-than-doubling was far from a record growth rate. That was achieved with a 146.76 percent burst in July, 2019.

Since the widely forecast upcoming U.S. recession seems likely to arrive later this year (assuming it arrives at all) than originally forecast, the trade deficit seems likely to continue increasing, too. But that outcome isn’t inevitable, as shown by the deficit’s shrinkage in the second half of last year, when America’s economic growth rebounded from a shallow recession.

The number of major wildcards out there remains sobering, too, ranging from the path of U.S. inflation and consequent Federal Reserve efforts to fight it by cooling off the economy, to levels of net government spending increases (including at state and local levels), to the strength or weakness of the U.S. dollar, to the pace of China’s economic reopening, to the course of the Ukraine War. 

On balance, though, I’ll stick with my deficit-increasing forecast, since (1) I’m still convinced that the approach of the next presidential election cycle will prevent any major Washington actors from taking any steps remotely likely to curb Americans’ borrowing and spending power significantly for very long; and (2) I’m skeptical that even the strong-sounding Buy American measures  instituted by the Biden administration (mainly in recently approved infrastructure programs and semiconductor industry revival plans, and in the green energy subsidies in the Inflation Reduction Act) will enable much more substitution of domestic manufactures for imports – least in the foreseeable future.          

Advertisement

Following Up: Podcast On-Line of National Radio Interview on Apple’s Exodus from China

Tags

Apple, CBS Eye on the World with John Batchelor, China, Following Up, friend-shoring, globalization, Gordon G. Chang, manufacturing, offshoring, reshoring, supply chain, Tim Cook, Zero Covid

I’m pleased to announce that the podcast is now on-line of my interview last night on the nationally syndicated “CBS Eye on the World with John Batchelor.” 

Click here for a timely discussion – with co-host Gordon G. Chang – about the possibly sweeping implications for the futures of the U.S. and Chinese economies of Apple’s apparent decision to move more and more production out of the People’s Republic faster and faster.

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

Making News: Back on National Radio Tonight on Apple and China, & a New Podcast On-Line

Tags

Apple, CBS Eye on the World with John Batchelor, CCP Virus, China, coronavirus, COVID 19, decoupling, Employment, friend-shoring, Jobs, Making News, Market Wrap with Moe Ansari, recession, subsidized private sector, supply chains, Zero Covid, Zero Covid protests

I’m pleased to announce that I’m scheduled to be back tonight to the nationally syndicated “CBS Eye on the World with John Batchelor.” Our subject – an update to Saturday’s report on Apple’s potentially game-changing decision to move production out of China at a faster pace. 

I don’t know yet when the pre-recorded segment will be broadcast but John’s show is on between 9 PM and midnight EST, the entire program is always compelling, and you can listen live at links like this. As always, moreover, I’ll post a link to the podcast as soon as one’s available.

Speaking of podcasts, the recording is now on-line of yesterday’s interview on the also-nationally syndicated “Market Wrap with Moe Ansari.” The segment focused on my post yesterday on the worsening quality of many of America’s newly created jobs, the political and economic impact of Chinese protests against the regime’s Zero Covid policy, and the latest signs of an impending U.S. recession.

To listen, click here, and scroll down a bit till you see my name on the left.  The segment begins at about the 21:30 mark.

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

(What’s Left of) Our Economy: Worsening U.S. Trade Deficits are Back for Now

Tags

Advanced Technology Products, CCP Virus, China, coronavirus, COVID 19, dollar, euro, Europe, exchange rates, exports, goods trade, imports, manufacturing, natural gas, non-oil goods, services trade, Trade, trade deficit, Wuhan virus, Zero Covid, {What's Left of) Our Economy

At least if you don’t factor in inflation, this morning’s official U.S. figures (for October) show that an encouraging recent winning streak for America’s trade flows and their impact on the economy has come to an end for now.

The winning streak consisted of overall monthly trade deficits that shrank sequentially from April through August, which means – according to how Washington and most economists calculate such things – that trade was contributing to the economy’s growth. And that five month stretch was the longest since the shortfall declined for six straight months between June and November, 2019.

Even better, this contribution translated into expansion that was healthier, fueled more by producing and less by borrowing and consuming. Better still, during the last part of this period, the deficit was falling while growth was taking place – as opposed to the more common pattern of a declining deficit limiting contraction mainly because a shriveling economy was buying fewer imports. And better still, for most of these months, the trade gap shrank both because exports climbed and imports dropped.

In October, however, the combined goods and services deficit rose for the second consecutive month, and by 5.44 percent, from an upwardly revised $74.13 billion to $78.16 billion. That total, moreover, was the highest since June’s $80.72 billion. And also for the second straight month – exports dipped and imports advanced.

That consecutive sequential export decrease was the first such stretch since the peak CCP Virus period of March thru May, 2020. The actual decline was 0.73 percent, from an upwardly revised $258.51 billion to $256.63 billion – a total that was the lowest since May’s $256.08 billion

The total import increase was also the second straight, and marked the first back-to-back improvements since January through March of this year (which capped an eight-month period of increases). These foreign purchases advanced by 0.65 percent in October, from an upwardly revised $332.64 billion to $334.79 billion.

Up for the second straight month as well as the goods trade deficit – a development that last happened from November, 2021 through January, 2022. The gap widened by 6.51 percent, from upwardly revised $93.50 billion to $99.59 billion, and this figure was the highest figure since May’s $104.33 billion.

Goods exports fell for the second straight month in October, too – a first since that peak virus period of March through May, 2020. (The streak actually began in February.) The October retreat was 2.06 percent, and brought the total from a downwardly revised $179.69 billion to $175.98 billion – its worst since April’s $176.80 billion

Goods imports grew a second straight month, too, from an upwardly revised $273.19 billion to $275.57 billion. The 0.87 percent increase resulted in the highest monthly level since June’s $282.68 billion.

Services trade, which is dwarfed by goods trade, nonetheless produced some bright spots in the October trade report. The longstanding surplus in this sector, which was so hard hit by the pandemic, improved for the first time in three months, froma downwardly revised $19.37 billion to $21.43. The 10.62 percent increase produced the best monthly total since last December’s $21.66 billion.

Most of this progress stemmed from the ninth consecutive advance and the seventh straight record in services exports. In October, they expanded from an upwardly revised $78.82 billion to $80.65 billlion.

Services imports dipped by 0.38 percent, from an upwardly revised record of $59.45 billion to $59.22 billion.

Manufacturing’s chronic and enormous trade shortfall became more enormous in October, worsening by 4.32 percent, from $129.14 billion to $134.73 billion. That total was the second highest ever, after March’s $142.22 billion.

Manufacturing exports inched down by 0.24 percent, from $110.69 billion to $110.42 billion, while imports surged by 2.07 percent, from $240.10 billion to a second-highest ever $245.17 billion (behind only March’s $256.18 billion).

At $1.2745 trillion (up 18.06 percent from the 2021 level), the year-to-date manufacturing trade deficit is already close to the annual record – last year’s $1.3298 trillion.

By contrast, dictator Xi Jinping’s over-the-top Zero Covid policies no doubt helped depress the also chronic and enormous U.S. goods trade deficit with China by 22.58 percent on month in October. The nosedive was the biggest since the 38.93 percent plummet in February, 2020, when the People’s Republic was locking itself down against the first CCP Virus wave. And the October monthly trade gap was the smallest since August, 2021’s 31.66 percent.

Interestingly, U.S. goods exports to China soared by 31.38 percent on month in October, from $11.95 billion to $15.70 billion. That amount was the highest since last November’s $15.87 billion, and the monthly increase of 31.33 percent was the fastest since October, 2021’s 51.23 percent.

Imports, however, sank by 9.49 percent, from $49.25 billion to $44.57 billion. The level was the lowest since May’s $43.86 billion and the rate of decrease the greatest since April’s 11.82 percent.

Year-to-date, the China goods trade gap has ballooned by 18.68 percent, once again faster than the rise of the U.S. non-oil goods deficit (17.53 percent), its closest global proxy.

In October, for a change, the widening of the overall U.S. trade deficit – and then some – came largely from a booming imbalance with Europe. The goods gap with the continent skyrocketed by 48.51 percent, sequentially, from $15.78 billion to $23.44 billion. That new total was the biggest since March’s $28.50 billion and the rate of increase the fastest since it shot up by 68.37 percent that same month.

U.S. goods exports to Europe actually set a new record in October ($44.27 billion, versus the old mark of $43.61 billion in June). But American global sales of natural gas, which are up 52.51 percent on a year-to-date basis due largely to the continent’s need to replace sanctioned Russian energy supplies, oddly pulled back by 9.90 percent.

At the same time, American goods imports from Europe, surely reflecting a weak euro, leaped by 16.35 percent, from $58.19 billion to $67.71 billion. That total was the second highest on record (trailing only March’s $70 billion) and the monthly increase (16.35 percent) the fastest since March’s 32.43 percent.

October trade in Advanced Technology Products (ATP) set several records, but most were the bad kind. The deficit worsened by 7.70 percent, from $24.32 billion to $26.19 billion, and hit its second straight all-time in the process.

Exports set a new record, rising 4.08 percent on month, from $34.33 billion to $35.73 billion. (The old mark of $34.91 billion dates back to March, 2018.)

Imports also reached their second straight all-time high, climbing 5.58 percent sequentially, frm $58.65 billion to $61.92 billion.

Moreover, year-to-date, the ATP trade shortfall is up 32.17 percent, and at $204.21 billion, it’s already set a new annual record.

Some relief could be in store for America’s trade flows in the coming months. The dollar has weakened in recent weeks, which will restore some price competitiveness for U.S.-origin goods and services at home and abroad. And a recession, a further growth slowdown, and/or continued high inflation could keep reducing imports as well (though that’s the kind of recipe for smaller trade deficits that no one should welcome).

At the same time, solid economic growth could continue, as it has throughout the second half of the year. Americans’ spending power could remain strong, given still huge (though dwindling) amounts of savings amassed during the pandemic. At the behest of U.S. allies, President Biden seems likely to weaken the Buy American provisions governing the green energy production incentives in the Inflation Reduction Act. And China’s export machine could revive as Beijing decides to back away from economically crippling levels of lockdowns.

At this point, however, I’m thinking that recent deficit improvement will keep “rolling over” as Wall Streeters call a steady reversal of investment gains. It’s not much more than a gut feeling. But my hunches aren’t always wrong.

Im-Politic: So Fauci Finally Gets It on Lockdowns?

Tags

Anthony S. Fauci, Biden administration, CCP Virus, China, coronavirus, COVID 19, facemasks, Im-Politic, lockdowns, social distancing, Wuhan virus, Xi JInPing, Zero Covid

Retiring U.S. chief infectious disease specialist Dr. Anthony S. Fauci told us over the weekend that he’s just shocked by what he calls China’s pointlessly “draconian” Zero Covid policy to defeat the CCP Virus. And the Biden administration has been critical, too. To which the only reasonable response is, “Seriously?”

Not that Zero Covid hasn’t been an epic fail by Chinese dictator Xi Jinping. But the criticism from Fauci and the Biden presidency sure looks like the pot calling the kettle black.

If you’re skeptical, here’s Fauci’s response to a question noting perceptively that “you’re seeing things that we saw in this country when people didn’t like how Covid response — What is going on in China, and why do they seem to be in a worse place than anyone else in the world?”

“[T]heir approach has been very, very severe and rather draconian in the kinds of shutdowns without a seeming purpose. I mean, if you’re having a situation, if you can recall, you know, almost three years ago when we were having our hospitals overrun, you remember the situation in New York City, you had to do something immediately to shut down that flow. So remember we were talking about flattening the curve and the social distancing and restrictions and shutdown, which was never really complete, is done for a temporary period of time for the purpose of regrouping, getting more personal protective equipment, getting people vaccinated. It seems that in China it was just a very, very strict extraordinary lockdown where you lock people in the house but without any seemingly endgame to it.”

No one can reasonably criticize any public official for urging extreme and sweeping anti-virus measures during the pandemic’s early days – before its nature and especially its highly granular lethality (overwhelmingly concentrated in seniors and others with major health problems) were understood. For it could have been like the Black Death.

But of course Fauci, the rest of the official public health establishment, and left-of-center leaders like Biden, were championing these policies long after these patterns became known.

And more important, when it comes to comparing U.S. policies during his tenure with Chinese policies today, Fauci’s claim that he was only urging “social distancing and restrictions and shutdown” essentially until vaccination was widespread ignores his stated belief in March, 2020 that “It will take at least a year to a year in a half to have a vaccine we can use.” And of course getting enough arms jabbed to turn the CCP Virus tide was always going to take months more even if the rollout went perfectly (which was far from the case). And what if the vaccines were major flops?

So Fauci himself clearly felt that pretty draconian policies – despite their devastating impact on the economy, on education, and on Americans’ mental health – would be needed over a very long haul. Therefore, when it counted, his differences with the approach taken recently by China (which lacks vaccines even as effective as America’s imperfect – especially against transmission – versions) was one of degree, not of kind.

Just as bad, as with Xi Jinping, this conviction of Fauci’s didn’t seem to be greatly affected by the proven potential of natural immunity per se to help end the pandemic (especially as variants, predictably, became more infectious but less lethal), or by the emerging evidence of sharp limits (to put it diplomatically) to the utility of social distancing in and of itself, and masking – and even of widespread lockdowns themselves.

Fauci’s declaration that “a prolonged lockdown without any seeming purpose or end game to it…really doesn’t make public health sense” comes way too late to impact America’s strategy during the pandemic era.  But hopefully it will dissuade both politicians and the public health establishment from repeating these grave mistakes when the next pandemic – inevitably – comes the nation’s way.

(What’s Left of) Our Economy: More Evidence That Stimulus-Bloated Demand is the Main U.S. Inflation Driver

Tags

CCP Virus, China, consumer price index, consumers, coronavirus, COVID 19, Covid relief, CPI, demand, inflation, Jobs, population, retirement, stimulus, Sun Belt, supply, supply chains, The New York Times, Ukraine War, workers, Wuhan virus, Zero Covid, {What's Left of) Our Economy

The New York Times just provided some important evidence on the big role played by super-charged consumer demand in super-charging inflation – this article showing that the Sun Belt has been the U.S. region where prices have been rising fastest.

The finding matters because a debate has been raging among politicians and economists over the leading causes of multi-decade high inflation rates with which Americans have been struggling over the last year and a half or so.

On one side are those who claim that overly generous government stimulus spending is the main culprit, because it’s increased U.S. buying power much faster than the supply of goods and services has grown. On the other side are those who focus on the inadequate amount of goods and services that companies are turning out, stemming from supply chain disruptions rooted in the stop-and-go nature of the American economy from successive waves of pandemic downturns and slowdowns to the Ukraine war to China’s ridiculously draconian Zero Covid policies.

Clearly, all these developments deserve blame, but the regional disparities in inflation rates provide pretty convincing support for emphasizing bloated demand.

Here’s the latest annual disparity in the headline Consumer Price Index as presented in the Times article:

U.S. total:    8.5 percent

South:          9.4 percent

Midwest:     8.6 percent

West:          8.3 percent

Northeast:   7.3 percent

It correlates roughly, by the way, with the data in this report last spring from the Republican members of Congress’ Joint Economic Committee.

And here’s a principal, demand-related reason: The Sun Belt states of the South and West have been the U.S. states that have gained the most population during the pandemic period. Indeed, according to the latest U.S. Census data, eight of the ten states with the fastest overall population growth between July, 2020 and July, 2021 was a southern or southwestern state, and the same holds for five of the ten states with the fastest population growth in percentage terms.

It’s true that population growth often increases supply, too – by boosting numbers of workers. The U.S. government doesn’t break out job creation along the above regional lines, but a look at individual state totals doesn’t conclusively brand the Sun Belt as an national employment leader. On average, relatively speaking, Arizona, California, Florida, Nevada, and Texas have created more jobs from the pandemic-period bottom in April, 2020 through last month, as shown in this table:

U.S. total:    +16.87 percent

California:   +17.98 percent

Florida:        +21.05 percent

Texas:          +17.31 percent

Arizona:       +16.02 percent

Nevada:        +30.92 percent

But don’t forget – many of these states have outsized travel and tourism sectors, and you know what happened to those activities during the worst of the pandemic. So in part, their employment bounced back so quickly because they had plummeted so dramatically as the CCP Virus’ first wave spread.

Moreover, many of these states are big retirement destinations, too, and as their overall population increase makes clear, this trend has intensified since the pandemic arrived. Of course, the workers in any given state don’t only sell goods and services to that state’s population, and a given state’s residents don’t only buy goods and services from providers in that state. Yet it’s certainly noteworthy that the number of the Sun Belt states’ consumers rose faster relative to the national average than the number of Sun Belt workers.

And in this vein, Sun Belt inflation probably is also particularly hot partly because so many of the newcomers are wealthy. Indeed, one recent study found that, early in the pandemic, “Of the 10 states with the largest influx of high-earning households, nine are located in the Sun Belt, including the six-highest ranked states, starting with Florida.”

Because they bring so much spending power to their new home states, these wealthier Americans naturally tend to drive prices up unusually fast.

As the Times article notes, some prominent reasons for scorching Sun Belt inflation are unrelated to population-driven demand growth – notably much lower population densities that generate more gasoline-using driving.  But the impact of population movement and all the disproportionately high inflation it’s clearly creating is hard to ignore.  And if a consumption shock has spurred so much inflation in the Sun Belt, why wouldn’t it be affecting prices this way in the rest of the nation, too?          

 

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

Tags

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.

(What’s Left of) Our Economy: Another Dreadful U.S. Consumer Inflation Report

Tags

Commerce Department, consumer price index, consumers, core inflation, cost of living, CPI, demand, energy, Federal Reserve, food, inflation, Labor Department, monetary policy, PCE, personal consumption expenditures index, prices, supply chains, Ukraine War, Zero Covid, {What's Left of) Our Economy

Optimism about U.S. inflation took another blow yesterday morning – though it shouldn’t have been unexpected – with the release of the latest data on the Federal Reserve’s favorite measure of price changes. I said “shouldn’t have been unexpected” because, as Fed Chair Jerome Powell and others have noted, this gauge and the higher profile Consumer Price Index (CPI) put out by the Labor Department normally track each other pretty closely over the long run, and those CPI results were deeply discouraging.

Nonetheless, latest results from the Price Indexes for Personal Consumption Expenditures (PCE) monitored by the Commerce Department matter because they strongly confirmed the latest CPI figures – which were pretty awful – starting with the month-to-month changes for the entire economy.

In June, headline PCE inflation shot up sequentially by a full one percent – much faster than May’s 0.6 percent and indeed the fastest rate not only throughout this latest high-inflation period, but the fastest since it increased by one percent in September, 2005.

But another observation should make even clearer how unusual that monthly headline increase was. The Commerce Department has been keeping these data since February, 1959. That’s 749 months worth of results through last month. How many times has monthly headline PCE inflation been one percent or higher? Twelve. And the all-time record is just 1.2 percent, hit in March, 1980, and February and March, 1974.

The annual figures were no better, and RealityChek regulars know that they’re more reliable than the monthlies because they measure changes over a longer time period, and therefore smooth out short-term fluctations.

June’s 6.8 percent rise was the strongest of the current high inflation era, and a significant pickup from May’s 6.3 percent. And it looks even worse when the fading baseline effect is taken into account. The June yearly jump in headline PCE came off a June, 2020-21 increase of four percent. So that year’s June PCE rate was already twice the Federal Reserve’s two percent annual inflation target.

By comparison, headline PCE this March was only a little lower than the June result – 6.6 percent. But the baseline figure for the previous March was only 2.5 percent. That rate was still higher than the Fed target, but not by much. So arguably unlike the price advances of June, this March’s inflation reflected some catching up from price increases that were still somewhat subdued due to the economy’s stop-go recovery from earlier during the pandemic.

Core PCE was lower by both measures, because it strips out the food and particularly energy prices that have spearheaded much headline inflation, and that are excluded supposedly because they’re volatile for reasons having little to do with the economy’s fundamental vulnerability to inflation. But here the monthly figures revealed new momentum, with the June seqential increase of 0.6 percent twice that of May’s 0.3 percent, and the highest such number since May and June of 2021.

Before then, however, core inflation hadn’t seen a monthly handle in the 0.6 percent neighborhood since September and October of 2001, which registered gains of 0.6 and 0.7percent, respectively.

On an annual basis, June’s core PCE increase of 4.8 percent was slightly higher than May’s 4.7 percent, but well below the recent peak of 5.3 percent in February. But the baseline effect should dispel any notions of progess being made. For June-to-June inflation for the previous year was 3.5 percent – meaningfully above the Fed’s two percent target. Core annual PCE inflation for the previous Februarys was just 1.5 percent – meaningfully below the Fed target.

As with most measures of U.S. economic perfomance, an unprecedented number of wild cards that can affect both PCE and CPI inflation has rendered most crystal balls (including mine) pretty unreliable. To cite just a few examples: Will China’s Zero Covid policy keep upending global supply chains and thus the prices of Chinese exports? Will the ongoing Ukraine War have similar impacts on many raw materials, especially energy? Will the Federal Reserve’s tightening of U.S. credit conditions per se bring inflation down significantly in the foreseeable future by dramatically slowing the nation’s growth? Will high and still soaring prices, coupled with vanishing savings rates, achieve the same objective if the Fed’s inflation-fighting zeal wanes? Or will the still huge amounts of money in most consumers’ bank accounts along with continuing robust job creation keep the demand for goods and services elevated for the time being whatever the Fed does?

Here’s what seems pretty certain to me: As long as that consumer demand remains strong, and as long as producer prices keep jumping, businesses will pass these rising costs on to their customers and keep consumer inflation worrisomely high. That seemed to be precisely the case in the last two months, with a torrid May read on producer prices being followed by the equally torrid June consumer inflation reports. So unless this wholesale inflation cooled a great deal this month, I’d expect at least another month of red hot consumer inflation. That producer price report is due out August 11.

(What’s Left of) Our Economy: Is the U.S. Trade Deficit’s Latest Dip More than Recession-y?

Tags

CCP Virus, China, coronavirus, COVID 19, economic growth, exports, GDP, goods trade, gross domestic product, imports, inflation-adjusted growth, real GDP, real trade deficit, recession, services trade, supply chains, Trade, trade deficit, Ukraine War, Zero Covid, {What's Left of) Our Economy

Although yesterday’s official figures show that the U.S. economy has now shrunk for the second straight quarter, the nation’s chronic and immense trade deficit played a diametrically different role in producing the final results. Whereas during the first quarter of this year, the trade gap’s widening was the difference between expansion and contraction of the gross domestic product (GDP – the standard measure of the economy’s size), during the second quarter (at least according to the new advance figures), its narrowing kept the drop in GDP from being considerably worse.   

The tumble of 0.94 percent at annual rates revealed in GDP after inflation (the most widely followed measure, and the GDP gauge that will be used throughout this post unless otherwise specified) came on top of a 1.58 percent decrease in the first quarter. As many have observed, two consecutive quarters of real GDP decline has long been a common definition of a recession.

This time around, however, a 4.53 percent fall-off in the inflation-adjusted trade shortfall, from a record $1.5447 trillion at annual rates to $1.4747 trillion, generated 1.43 percentage points of sequential growth in the second quarter. Although the new deficit was still the second biggest on record, the improvement prevented the quarter’s GDP drop from reaching 2.37 percent – which would have been the worst such performance since the nearly 36 percent crash dive recorded between the first and second quarters of 2020, when the CCP Virus pandemic and its impact on the economy were at their worst.

This year’s second quarter, moreover, marked the first time that America’s trade flows had added to growth, and the biggest such contribution in absolute terms, since that spring of 2020, when the pandemic and related mandated and voluntary curbs on economic activity greatly depressed U.S. imports. In relative terms, the second quarter’s trade contribution to growth was the best since the second quarter of 2009, near the end of the Great Recession that followed the global financial crisis. During that quarter, real GDP sank at an annual rate of 0.68 percent, but trade generated 1.53 percentage points of growth.

By contrast, during the first quarter, the trade deficit’s expansion subtracted a whopping 3.23 percentage points from the change in GDP – which turned what would have been a 1.65 percent sequential increase into that 1.58 percent shrinkage.

The reduction in the trade deficit also enabled the shortfall to decrease as a percentage of the entire economy from the first quarter’s all-time high of 7.83 percent to 7.49 percent. Further, the 4.34 percent sequential decrease represented by this progress was the biggest since the 9.45 percent decline in the fourth quarter of 2019 – just before the pandemic arrived state-side in force.

At the same time, at 7.49 percent of real GDP, the second quarter trade deficit was still the second highest ever, and since that immediately pre-pandemic-y fourth quarter of 2019, the trade shortfall has ballooned by 73.99 percent. As of the first quarter, it had swollen during this period by 82.24 percent.

Ordinarily, the reasons for this trade deficit decline would be a clearcut positive:  Even though the gap usually narrows as the economy weakens, it stemmed from  total exports (counting goods and services) advancing much faster than the much larger amount of imports. But as the nation and world are still in the CCP Virus and in the middle of the Ukraine War, with all the supply chain turbulence they’ve both brought on and will surely keep bringing, drawing strong conclusions still seems unusually hazardous.   

Those total U.S. exports improved by 4.22 percent on quarter, from $2.3613 trillion at annual rates to $2.4410 trillion – the highest such total since the $2.5533 trillion recorded in the fourth quarter of 2019, just before the pandemic hit the U.S. economy. The results were especially encouraging since total exports fell sequentially in the first quarter (by 1.23 percent), and given the global economic slowdown and the dollar’s strengthening to roughly 20-year highs versus nearly all currencies. This move in and of itself put U.S.-origin goods and services at a price disadvantage versus foreign competitors the world over.

Combined goods and services exports are now down just 3.61 percent since that fourth quarter of 2019, versus the 7.52 percent calculable last quarter.

Total imports inched up just 0.76 percent, although the new $3.9357 trillion annualized level did amount to a sixth straight record and an eighth consecutive quarterly increase. These purchases have now climbed by 15.37 percent during the pandemic era, versus the 14.85 percent calculable last quarter.

The goods trade deficit, meanwhile, declined by 3.96 percent sequentially, from the first quarter record total $1.6572 trillion annualized to $1.5916 trillion. This drop was the first since the peak pandemic-y second quarter of 2020, and the biggest since the 6.52 percent shrinkage in the fourth quarter of 2019. The goods trade gap, consequently, has grown by 48.55 percent since the end of 2019, as opposed to the 54.68 percent calculable last quarter.

Goods exports in the second quarter rose 3.69 percent from the first quarter’s $1.7577 trillion at annual rates to a new record $1.8225 trillion – surpassing the previous all-time high of $1.8046 trillion set in the first quarter of 2019. These new results also mean that goods exports have finally exceeded pre-pandemic levels (by 2.24 percent). After the first quarter ended, they were still down 1.39 percent since the fourth quarter of 2019.

Goods imports, however, recorded their first quarterly decrease since the third quarter of 2021 – though only from a worst ever $3.4149 trillion annualized to $3.4141 trillion. But these imports are still 19.63 percent higher than in that immediate pre-pandemic fourth quarter of 2019.

The services trade surplus improved by 8.60 percent between the first and second quarters, from $109.3 billion at annual rates to $118.7 billion. Reflecting the unusually hard hit delivered by the pandemic to the service sector, however, this surplus is still 47.64 percent lower than its level just before the virus began seriously affecting the U.S. economy. That is, it’s been nearly cut in half.

Services exports in the second quarter actually increased sequentially for the third straight time. And the 5.56 percent advance, from $631.5 billion annualized to $666.6 billion was the strongest since the 5.83 percent jump in the fourth quarter of 2006. Nonetheless, services exports remain 13.84 percent off their immediate pre-pandemic level, versus the 18.38 percent calculable last quarter.

Services imports are now back above their pre-pandemic levels, too (by 1.65 percent), having risen 4.92 percent sequentially in the second quarter, from $522.2 billion at annual rates to $547.9. The improvement, moreover, was the fastest since the 7.80 percent recorded in last year’s third quarter.

As mentioned above, usually it’s unambiguously good news for both trade, and to a lesser extent, the entire economy, when the trade deficit diminishes because exports are up considerably faster than imports. It’s normally even better news when these kinds of results are delivered in challenging international and exchange rate environments. But with the Ukraine War and China’s Zero Covid policy still distorting U.S. and global trade flows and unlikely to end anytime soon, unbridled optimism is hard to justify. So like the Federal Reserve, RealityChek will remain data dependent as it tries to detemine the outlook for U.S. trade’s fortunes.

(What’s Left of) Our Economy: A Second Straight Month of Production Shrinkage for U.S. Manufacturing

Tags

aircraft, aircraft parts, apparel, appliances, automotive, CCP Virus, China, coronavirus, COVID 19, dollar, electrical components, electrical equipment, exchange rates, Federal Reserve, fiscal policy, inflation, inflation-adjusted growth, machinery, manufacturing, medical devices, medicines, metals, miscellaneous durable goods, monetary policy, personal protective equipment, petroleum and coal products, pharmaceuticals, production, real output, recession, semiconductor shortage, semiconductors, stimulus, supply chains, textiles, Trade Deficits, Wuhan virus, Zero Covid, {What's Left of) Our Economy

Yesterday’s after-inflation U.S. manufacturing production report (for June) marked a second straight decline in real output for domestic industry, adding to the evidence that this so far resilient sector is finally suffering the effects of the entire economy’s recent slowdown.

Another possible implication of the new downbeat results: The record and surging trade deficits being run in manufacturing lately may finally be starting undermine U.S.-based manufacturing’s growth. (See here for how and why.)

Also important to note: This release from the Federal Reserve incorporated the results of both typical monthly revisions but also its annual “benchmark” revision, which reexamined its data going back several years (in this case, to 2020), and updated the figures in light of any new findings.

And the combination has revealed some big surprises – notably that the domestic semiconductor industry, which along with its foreign competition has been struggling to keep up with recently booming worldwide demand, has turned out fully 36 percent less worth of microchips on a price-adjusted basis since the CCP Virus struck than was calculable from the (pre-revisions) May report.

In real terms, U.S.-based manufacturing shrank by 0.54 percent on month in June – the worst such result since last September’s 0.78 percent drop. Moreover, May’s originally reported 0.07 sequential percent dip is now judged to be a decrease of 0.52 percent.

The April results remained good, but were downgraded a second time, from 0.75 percent monthly growth in after inflation to 0.66 percent, while the March numbers told a similar story, with a third consecutive modest downward revision still leaving that month’s inflation-adjusted expansion at 0.76 percent.

Especially discouraging, though – the June report plus the two revisions left constant dollar U.S. manufacturing output just 2.98 percent greater than just before the pandemic struck the economy in full force and began distorting it, in February, 2020. The pre-benchmark revision May release pegged its virus-era real growth at a much higher 4.94 percent, and the first post-benchmark number was 4.12 percent.

May’s biggest manufacturing growth winners among the broadest manufacturing categories tracked by the Fed were:

>the very small apparel and leather goods industry. Its price-adjusted output surged by 2.54 percent month-to-month in June – its best such perfomance since May, 2021’s 2.63 percent. May’s initially reported 0.88 percent gain was revised down to a 0.34 percent loss, though. April’s upgraded 0.30 percent rise is now judged to be a 0.33 percent decrease, and March’s figures were revised down after two upgrades – from 1.54 to a still solid 1.30 percent. But whereas last month’s Fed release showed inflation-adjusted production in this sector up 4.59 percent during the pandemic era, this growth is now pegged at just 0.56 percent; 

>the miscellaneous durable goods sector, which contains the medical products like personal protective equipment looked to as major CCP Virus fighters. It’s June sequential output jump of 2.25 percent was its biggest since March, 2021’s 2.61 percent, and revisions were overall positive. May’s initially reported 0.96 percent monthly price-adjusted production gain was downgraded to 0.49 percent, but the April figure was revised up for a second time – to 0.71 percent – and March’s results were upgraded a third straight time, to 0.51 percent.

These industries are now 14.11 percent bigger in constant dollar terms than in February, 2020, versus the 11.41 percent gain calculable last month; and

>the electrical equipment, appliances, and components cluster, where price-adjusted production climbed 1.34 percent on a monthly basis in June, the strongest such showing since February’s 2.29 percent.. Revisions were positive on net, with May’s originally reported 1.83 percent monthly falloff downgraded to one of 2.35 percent, but April’s initially estimated -0.60 percent decrease upgraded a second time,to a 0.49 percent gain, and March’s three revisions resulting in an originally judged 1.03 percent increase now pegged at 1.23 percent. These results pushed these companies’ real production 5.59 percent higher than in immediately pre-pandemic-y February, 2020, not the 2.19 percent calculable last month;

The list of biggest manufacturing inflation-adjusted output losers for June was considerably longer, starting with

>printing and related support activities, where the monthly inflation-adjusted production loss of 2.16 percent was the worst such showing since February, 2021’s 2.26 percent. Revisions were actually net positive, with May’s initially reported dip of 0.35 percent upgraded to one of 0.15 percent; April’s results downgraded from a one percent advance to one of 0.33 percent after being revised up from an initially reported 0.49 percent; and March’s totals rising cumulatively from an initially reported 1.10 percent decrease to a decline of just 0.05 percent. All the same, the printing cluster is now judged to be 11.37 percent smaller in real terms than in February, 2020, not the 1.89 percent calculable last month;

>petroleum and coal products, whose June sequential production decrease of 1.92 percent was its biggest since January’s 2.96 percent. Revisions here were mixed, too, with May’s figure revised up from a 2.53 percent improvement to one of 2.61 percent; April’s totals downgraded a second time, from a 0.13 rise to one of 0.04 percent to a decrease of 1.91 percent; and March’s results increasing from an initial estimate of 0.72 percent to one of 1.03 percent. But whereas last month’s Fed release showed petroleum and coal products’ after-inflation output 1.21 percent above its last pre-pandemic level, this month’s reports that it’s 0.27 percent below.

>textiles and products, where price-adjusted output sank on month by 1.80 percent for its worst month since March’s 2.45 percent shrinkage. Revisions were negative, with May’s initially reported 0.02 percent real production decline downgraded to one of 0.35 percent, April’s upgraded 0.45 percent increase now pegged as a 0.05 percent decrease, and March’s initially reported 1.55 percent falloff now judged to be one of 2.45 percent. As a result, the sector is now 5.35 percent smaller in terms of constant dollar output, rather than down 3.80 percent as calculable last month; and

>primary metals, whose inflation-adjusted production sagged by 1.60 percent on month – its poorest performance since March’s 1.42 retreat. Revisions were overall positive here, with May’s initially reported 0.77 percent real output rise downgraded to one of 0.66 percent, April’s initially downgraded 1.22 percent increase revised up to 1.46 percent, and March’s initially reported 1.69 percent drop now judged to be that aforementioned 1.42 percent. Even so, primary metals price-adjusted production is now estimated as having inched up only 0.50 percent since the pandemic arrived, not the 4.45 percent increase calculable last month.

In addition, an unusually high three other major industry sectors suffered constant dollar output declines of more than one percent on month in June. On top of plastics and rubber products (1.25 percent), the were two that RealityChek has followed especially closely during the pandemic period – machinery and automotive.

As known by RealityChek regulars, the machinery industry is a bellwether for both the rest of manufacturing and the entire economy, since use of its products is so widespread. But in June, its real production was off by 1.14 percent on month, and May’s initially reported 2.14 percent decrease is now estimated at-3.14 percent – its worst figure since the 18.64 collapse recorded in pandemic-y April, 2020. And although this April’s numbers have been revised up twice, to have reached 2.20 percen, March’s initially reported 0.78 percent inflation-adjusted increase is now estimated to have been a 0.89 decrease. Consequently, in price-adjusted terms, the machinery sector is now estimated to be 4.70 percent larger than in February, 2020, not the 6.29 percent calculable last month.

As for motor vehicles and parts makers, dogged for months by that aforementioned semiconductor shortage, their real output was off by 1.49 percent on month in June, and May’s initially reported rise of 0.70 percent is now estimated as a1.86 percent decline. Following a slight downgrade, April’s output is now pegged as growing by 3.85 percent rather than 3.34 percent, and March’s initially reported 7.80 percent advance is now pegged at 9.08 percent – the best such total since last October’s 10.34 percent. Nonetheless, after-inflation automotive output is now reported to be 1.07 percent lower than just before the pandemic arrive in force, not the 1.17 percent higher calculable last month.

Notably, other industries that consistently have made headlines during the pandemic outperformed the rest of manufacturing in June.

Constant dollar output by aircraft- and aircraft parts-makers was up 0.26 percent month-to-month in June, but revisions were mixed. May’s initially reported 0.33 percent rise has now been downgraded to a 0.23 percent decline – snapping a four-month winning streak. April’s results were upgraded a second straight time – from a hugely upgraded 2.90 percent to an excellent 3.13 percent (the best such performance since January, 2021’s 8.60 percent burst). But the March figures have been substantially downgraded from an initially reported 2.31 percent to a gain of just 0.53 percent. After all this volatility, though, real aircaft and parts production is now 25.58 percent greater than in February, 2020, much better than the 19.08 percent calculable last month.

The big pharmaceuticals and medicines industry grew its real putput by another 0.39 percent in June, but revisions were generally negative. May’s initially reported 0.42 percent improvement, however, is now judged to be just an infinitesimal 0.01 percent. April’s upgraded 0.15 percent rise is now pegged as a 0.04 percent loss, and March’s results have been downgraded all the way from an initially reported 1.17 percent increase to one of just 0.49 percent. Price-adjusted output in these sectors, therefore, is now estimated at 12.98 percent higher than in February, 2020, versus the 14.64 percent calculable last month.

Medical equipment and supplies firms boosted their inflation-adjusted output for a sixth straight month in June, and by a stellar 3.12 percent – their best such performance since January’s 3.15 percent. May’s growth was downgraded from 1.44 percent to 1.01 percent, but April’s estimate rose again, from 0.51 percent to 1.01 percent, and March’s initially reported 1.81 percent improvement has been slightly downgraded to 1.67 percent. This progress pushed these companies’ real pandemic era output growth from the 11.51 percent calculable last month to 17.27 percent.

The news was significantly worse, though, in that shortage-plagued semiconductor industry. Real production rose by 0.18 percent sequentially in June, but May’s initially reported 0.52 percent advance is now judged to have been a 2.24 percent drop. Meanwhile, April’s already dreary initially reported 1.85 percent slump has now been downgraded again to one of 2.71 percent (the sector’s worst such performance since the 11.26 percent plunge in December, 2008 – in the middle of the Great Recession that followed the global financial crisis). Even March’s initially reported impressive 1.99 percent monthly price-adjusted production increase has been revised all the way down to 0.52 percent.

The bottom line: The pandemic-era semiconductor real production increase that was estimated at 23.82 percent last month is now judged to have been just 15.22 percent.

It’s not as if the recent official manufacturing data has been all disappointing. Employment, notably, rose respectably on month in June. And the pace of capital spending has actually sped up some (at least through May) – which, like employment is a sign of continued optimism among manufacturers about their future outlook.

But at this point, the headwinds look stronger – including continued credit tightening by the Federal Reserve (not to mention a drawdown in the massive bond purchases that also have significantly propped up the entire economy); the resulting downshifting in domestic economic growth at which the Fed is aiming in order to bring down raging inflation; an even worse slump in economies overseas, which have been important markets for U.S.-based industry; the strongest dollar in about two decades, which puts Made in America products at a price disadvantage the world over; and the ongoing supply chain snags resulting from the Ukraine-Russia War and China’s lockdowns-happy Zero Covid policy.

And don’t forget those stratospheric and still-rising manufacturing trade deficits, which could well mean that, once the unprecedented pandemic fiscal and monetary stimulus/virus relief that have helped create so much business for domestic industry starts fading significantly, U.S.-based manufacturers could might themselves further behind the eight-ball than ever.