US trade deficit
Via newsletter from rjs:
We’ll include Bill McBride’s graph from his coverage of this report below because it best shows how our trade deficit suddenly spiked over the past 5 months after 2 years of gradual improvement…reading from the top $0 line down, the black graph line tracks our deficit in petroleum trade only in billions of dollars since 1998; over the same span, the red graph shows our trade deficit for everything else except oil; combined together, those two are of course our total trade deficit, which Bill has graphed in blue…it’s pretty clear that even though our oil deficit has been falling (ie, going up towards zero on this chart), our deficit in everything else had been gradually increasing until December, when the recent spike started…
Chart below the fold:
i’ll take the liberty of incuding the first three paragraphs on that here, with the headline i wrote for it…
April Trade Deficit Rises 17% Above Originally Reported March Deficit in Another Hit to GDP
the April report on our International Trade in Goods and Services from the Commerce Department indicated that our seasonally adjusted trade deficit in goods and services was at $47.2 billion, up from revised $44.2 billion in March, as our exports fell $0.3 billion to $193.3 billion on a $0.6 billion decrease to $135.1 billion in goods exports and a $0.3 billion increase to $58.2 billion in services exports, while our imports rose $2.7 billion to $240.6 billion on a $2.7 billion increase to $200.9 billion in goods imports and less than a $0.1 billion increase in imports of services to $39.7 billion…the March trade deficit was revised from the previously reported $40.4 billion, making April the 5th increase in the trade deficit in a row, a bad start for 2nd quarter GDP and implying yet another writedown of our first quarter GDP…since last April, our goods and services deficit has increased by $6.8 billion, as our exports increased by $5.6 billion, or 3.0%, but our imports rose even more, by $12.4 billion, or 5.4% above last April’s level…
among the end use categories of exports that saw seasonally adjusted March to April decreases were capital goods, exports of which fell by $303 million to $45,811 million on a $255 million decrease in exports of civilian aircraft and a $228 million decrease in exports of uncategorized industrial machines, a $262 million decrease in our $11,890 million of April exports of foods, feeds, and beverages, as our soybean exports decreased by $664 million while our corn exports rose $235 million, a $173 million decrease in exports of automotive vehicles, parts, and engines to $12,713 million, and a $87 million decrease in exports of consumer goods to $16,326 million as our jewelry exports fell by $295 million, our gem diamond exports fell by $216 million, while exports of several other consumer goods categories rose marginally, led by a $135 million increase in exports of pharmaceuticals…meanwhile, our exports of industrial supplies and materials rose by $237 million to $42,018 million in April on a $632 million increase in exports of fuel oil and a $343 million increase in exports of organic chemicals which were partially offset by a $ million decrease in our exports of other petroleum products, while our exports of other goods not categorized by end use rose $119 million to $5,203 million…
end use categories of imports that saw seasonally adjusted increases for the month were topped by consumer goods, where our imports rose by $1,118 million to $47,505 million as our imports of cell phones rose by $1,243 million….at $27,167 million, we also imported $887 million more of automotive vehicles, parts, and engines in April, and our capital goods imports rose by $839 million to $48,636 million on $619 million more computer imports and $400 million more imports of telecommunications equipment…we also imported $10,791 million of foods, feeds, and beverages, $201 million higher than March on a $105 million increase in imports of green coffee beans, and our imports of other goods not categorized by end use rose $324 million to $6,953 million…imports of industrial supplies and materials was the only import category with a decrease. as they fell by $332 million to $57,671 million on $451 million less imports of fuel oil…
“another hit to GDP” is also in reference to the negative 0.3% real PCE logged in April…
industrial production also fell 0.6% in April…with the data we have so far, 2nd quarter GDP is looking negative…
Is the increase in the trade deficit related to the increase in employment?
when we buy goods from China instead of domestic producers, we’re employing Chinese, not Americans, Jerry…
Dean Baker made that point last week:
Why Do the Media Give So Much More Attention to Jobs We Lose Due to Environmental Restrictions Than Jobs We Lose Because of the Trade Deficit?
rjs:
Why is it that people do not realize the largest reason for the low cost of goods coming out of China is a much smaller Overhead or the lack of restrictive environmental laws, workman’s comp., social security, unemployment insurance, ES healthcare, OSHA, etc. In the scheme of the cost of manufacturing, the cost of Direct Labor is not as significant as the cost of Materials or Overhead. The percentage of the total Direct Labor cost is relatively low.
It is the lack there of Environmental Restrictions in those countries which is the chief factor in offering low cost. It is here the media should be paying the most attention on foreign competition and our unwillingness to pollute our environment.
I agree that if we buy goods manufactured here, employment would increase even more than it has. Is the drop in the trade deficit during the recent recession related to job loss?
not directly; the drop in the trade deficit at the height of the criss was cause we stopped buying almost everything we were importing; consumer goods, autos, capital goods, industrial supplies, etc…and remember that the price of oil fell from around $140 a barrel at the peak to near $35 at the bottom…you see on the chart how much our oil imports dropped; that was largely because of the lower price…
the trade deficit is denominated in dollars; it is not adjusted for prices until it’s subtracted from real GDP…
of course, run, we exported our pollution along with our jobs when we opened trade with China, and when we buy their goods, the associated environmental damage is rightfullly our pollution…
so China’s burning half the world coal, but it’s only one planet, and what goes into the atmosphere there effects us all..
rjs:
Yes, that is true. Forget the pollution aspect of it. You have one country which can manufacture in any manner it chooses to do so sans Social Security, Medicare, Healthcare, OSHA, Unemployment Taxes, Workman’s Comp., 401ks, Child labor, OT laws and wages, etc. The other country has all of the costs. This is the competition which has little to do with pollution or efficiency. Economists miss this aspect of it and we burden US Labor with it and claim US Labor costs more? Nonsense, when we look at direct labor and compare the two. Quit sounding like Delphi’s Miller which most economists do.
If you understand that, I will make you throughput analyst and we can then arrange shop floors to give the best and most efficient least costly output.
By the way, good topic and I miss you posting at AB.
Poor post Rjs. Trade deficit always rises when economic activity rises in mass in this system. Look at the past and nod your head in understandment. So called “negative pce” came after huge March gain and probably huge May gain(gauging by credit expansion).
Industrial prodution increased 2 points in the first quarter…….so much for that fall. That was a blip.
Lets also note, Christmas 2013 is being revised up in revisions so far which comfirms the trade data. Trade data indicates the American consumer is back……….spending credit like mad again.
This is why business investment and inventory surged in the 2nd half of 2013. Capital saw deleveraging ending and the credit monster coming alive. So far this year, trade data has proven that. Americans are buying up the foreign junk again at a pretty high level not seen in mass since the 1990’s and in recovery, not since the last expansion. This will surge business investment, especially this cycle, capex spending, capacity utilization will rise this summer and the recession will end.
Actual PCE levels this summer will be pretty high, with the weather factor balanced out.. Just follow the money with sales. This is something Ed Lambert will need to learn if he wants to understand modern cycles better. Credit comes first, then comes wages(or in the case of the last expansion, not enough wages).
@John Cummings
i was not making an economic forecast here, only explaining what the data to date shows..
the consensus was for a $41 billion trade deficit in April…$47 billion is a big miss…
others concur…Goldman, BofA, Credit Suisse all cut their Q2 GDP forecasts by around 0.5%..
@John Cummings yes it is true, why the media constantly obsess about the trade deficit is beyond me. As long as Asian countries can keep their exchange rates at artificially low levels there is not much we can do about it beyond our own trade controls, which would be bad all around in my opinion. Being a currency trader, I read a lot other pieces like on forexop and babypips but my only worry is what happens on unwinding of the mass of foreign assets. I watch for changes in the deficit but it only riles me if it is the hot topic.