Friday, June 10, 2005


Yes, March was indeed just a dream.
The U.S. Census Bureau and the U.S. Bureau of Economic Analysis, through the Department of Commerce, announced today that total April exports of $106.4 billion and imports of $163.4 billion resulted in a goods and services deficit of $57.0 billion, $3.4 billion more than the $53.6 billion in March, revised.
This number puts the US trade deficit back into familiar territory. The $57bn shortfall makes April's deficit the fourth largest of all time, with three of the four coming in 2005 alone. So far on the year the US trade deficit is a whopping 22% larger than in 2004. If we stay the course, the trade deficit will wind up over $750bn this year!

There is much to slice and dice in this report. One of the most interesting tidbits is the downward revision of the already (relatively) small March trade deficit. It was originally reported at $55.0bn, but now is revised down to $53.6bn. Anything under $55bn and one could credibly begin talking about a turning point in the persistent growth of the trade deficit. April's numbers put that talk to a halt.

It is quite amazing that the trade deficit continues to hover in the high $50bns when US goods exports hit a record in April: $74.5bn. Of course, US goods imports blew all previous figures out of the water in April: $136.7bn. The problem continues to be excessive US imports, not sluggish US exports.

What are we importing too damn much of? Surprisingly, the category of consumer goods is playing less and less a role in explaining the US trade deficit. So far for 2005, consumer goods imports are 12.3% higher while overall goods imports are up 15.7%. The real culprit seems to be industrial supplies imports, up a big 30.8% this year.

And this is not just a story about oil. Imports of industrial supplies minus fuels (crude oil, other petroleum products, natural gas, and liquified petroleum gases) are still up 20.4%, much higher than overall goods imports growth. Other big gainers include bauxite and aluminum (+30.7%), steelmaking materials (+46.9%), iron and steel mill products (+46.4%) and iron and steel products n.e.s. (+32.0%).

Let's take a closer look. If we check out NAICS 331 (primary metal manufacturing) which includes iron, steel and aluminum, we see massive growth in imports this year (through March April) from China (+$739m+$932m), Brazil (+$593m+$834m), Russia (+$561m+$857m), Canada (+$492m+$639m) and Mexico (+$343m+$456m). Looks like the death of the US steel and aluminum industries is taking its revenge on the trade deficit.

To put an exclamation point on the claim that this is not just a story about oil, note that US non-petroleum goods imports are up 13.0% in 2005 while total US goods exports are up 11.0% and total US exports (goods and services) are up 11.5%.

Now, discuss.


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