Thursday, August 14, 2003

So, the latest numbers to cheer "huzzah!" over are supposedly the June 2003 trade figures.
The U.S. trade deficit narrowed sharply in June, as improving economic growth overseas propelled exports to their largest monthly increase in three years and imports were unchanged, the government said on Thursday.

The smaller-than-expected trade gap totaled $39.5 billion, down from a revised estimate of $41.5 billion in May. Analysts surveyed before the report had expected the monthly trade deficit to narrow only marginally to $41.6 billion, from the Commerce Department's earlier estimate of $41.8 billion in May.
Well, certainly -$39.5bn is better than -$41.6bn, but let's not lose our heads now.

First, this monthly deficit is still the sixth largest ever, and all six have occurred during the past seven months. The trade deficit for the first half of 2003 is -$244.3bn, fully 25% larger than 2002 which itself was a record.

Second, the trade deficit has come down every month since peaking in March. Good news. However, the dollar slid all through these three months. The broad dollar index hovered around 124 all January and early February, then headed straight south until bottoming out at around 117 in June. Since June the dollar has gone up, where it now sits around 120. The moral of this story? Falling trade deficits coincided with falling dollar. Falling trade deficits to disappear now that dollar rising. We may still get another drop for July (currency movements take some time to work themselves out in the trade figures, after all) but that should be it. Then it's back to record-breaking territory.

And by the way, despite the big news that exports rose in June, they're still below in current dollars where they were two years ago.


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