Tuesday, September 13, 2005

Reporting the July trade report

Well surprise, surprise. Depsite steadily rising oil prices in July -- WTI spot prices averaged $59/barrel, up 4.7% over June and the price of imported petroleum and petroleum products jumped 6.2% in July -- the US trade deficit for July actually shrank.
The U.S. Census Bureau and the U.S. Bureau of Economic Analysis, through the Department of Commerce, announced today that total July exports of $106.2 billion and imports of $164.2 billion resulted in a goods and services deficit of $57.9 billion, $1.6 billion less than the $59.5 billion in June, revised. July exports were $0.4 billion more than June exports of $105.8 billion. July imports were $1.1 billion less than June imports of $165.3 billion.
A $57.9bn trade deficit puts July in fifth place all-time. While it is some comfort that the US hasn't set a new monthly record since February, so far this year the deficit is running 18% larger than 2004 and 40% larger than 2003.

Fears of a slowing global economy may be coming to fruition. While US exports are up a healthy 11% over last year's pace, the monthly total has been mostly stagnant since April, leveled out around a relatively high $106bn a month. Both goods ($74-75bn) and services ($31bn) are stationary. Certainly 2005Q3 is not going to show the impressive growth of 2005Q2.

While US exports have reached a plateau, US imports have not. June 2005 set a record, and July was just 0.7% lower and came in at #2 all-time. While total exports are up 10.9% this year, imports are up 13.4%. This is clearly not a formula for a shrinking deficit.

The good news -- if one is inclined to see it that way -- is that the big import surge this year is mostly due to oil. The US's imported petroleum bill is up a whopping 36.9% this year. At the same time, non-petroleum goods imports fell to their second lowest monthly total of the year in July, down to "just" $116.6bn.

That being said, on the year non-petroleum goods imports are up 11.0% and total non-petroleum imports are up 10.9% -- the very same rate as total exports. Considering total non-petroleum imports are 37.2% larger than total exports, even an equal growth rate between these two components of US trade is only going to make matters worse.

Less petroleum imports, less total imports. It's the only way. July was a good start on the non-petroleum import front. Let's see if it continues.

69 Comments:

At 9:02 AM, Blogger David said...

this is slightly positive news.

 
At 9:42 AM, Anonymous Anonymous said...

general.

Not so good news really. In non-adjusted terms, this was the biggest deficit ever. Frankly, I wouldn't trust the adjustments because the nature of the deficit is changing so rapidly that historical precendent may be inaccurate.

word.
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At 10:49 AM, Blogger fatbear said...

notre général

Good to hear from you again - hope the recusal was good for you.

Looking forward, the increased petro imports (60mm bbl) will add approx $2B to deficit, and the closedown of NOLA port will add ????

Sept and Oct will not read well.

 
At 11:15 AM, Anonymous DF said...

When wages go up, stupid brokers fear for profit and wreck the trend. Thus, the wage productivity gap widens.
THis is proven each time wages start going up (US 2000, now 2005) there is fear of inflation, fear for profits.

It will be interesting to see if chinese remain happy to finance the USA once the USA stop to increase their imports of chinese goods.

If they do not it means we have two powerful forces that are fighting with all their forces to avoid a rebalancing of the world economy.
Capitalists resist higher wages world wide, even though wages are too low world wide and even though consumers are piling up debt they will not be able to repay.
And exporters-bankers of of the USA resist the balancing of their trade with the USA, even though the USA is piling up debt it will not be able to repay.

Of course so far, I do not know of a relation between a shrinking US deficit and higher long term interest rates through lower increases of reserves by foreign central banks.
I'm just wondering.
What if foreign central banks are just as irrational as stock markets are ? What if they are betting the trend ?
Everybody talks about rebalancing the economy. But who's supposed to benefit from this ?
Who exactly is betting on a rebalance of the economy (dumping the dollar, building industrial plants in the USA, unionising asia, dumping banks and the housing industry world wide in favor of industry) ? Few people it seems to me. Most are waiting for the mood to change.

 
At 3:10 PM, Blogger brad said...

glut -- nice to have your voice back. impressive and impressively quick analysis!

 
At 3:18 PM, Blogger David said...

General Glut rocks. He is super. :-)

 
At 6:52 PM, Blogger CalculatedRisk said...

I posted some more thoughts.

I think we will see new SA trade deficit records soon.

Best Regards.

 
At 8:36 AM, Blogger fatbear said...

notre général

Agree with CR - and I do believe the cows will come home to roost before we get an RSS feed. If CR can have one, why not here, n'est pas?

 
At 9:29 AM, Anonymous DF said...

and now retail numbers fall.

All is in place for a rebalancing :
housing has topped (median prices are falling)
retail sales may have started to top
Non oil imports stop growing
wages start to move up faster than productivity.
China has begun to reevalue...

All the signs are timid and slow indeed. But 6 months ago all the signs pointed in the wrong direction, now they all point in the rebalancing direction.

Give us a fall in the stock market and everything will be OK.

 
At 3:30 PM, Blogger Gen. Glut said...

fatbear,

Ah, yes, I remember something about promising an RSS feed . . .

I'll work on that. My students can wait.

Gen'l Glut

 
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notre général said: I'll work on that. My students can wait.

What was it Derek Bok said?

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