Decline in Imports of Consumer Goods Leads Trade Deficit Lower

As reported by the BEA (Bureau of Economic Analysis) this morning (link to report provided above), the July trade deficit fell to $42.8 billion from $49.8 billion in June.  This is good news.  Or is it?

The decline was driven by a $4.2 billion decline in imports, supplemented by a $2.8 billion rise in exports.  The rise in exports can be attributed to two products – fuel oil and civilian aircraft.  (That’s right, we do export some petroleum products.)   The decline in imports is virtually all due to a decline in consumer goods.  That would be good news if it was due to a shift toward domestic manufacturing of these goods.  But it’s not.  It’s due simply to a slowdown in consumer spending – bad news for the economy in general.  Reducing the trade deficit is an important goal for the economy, but a recession isn’t the way to do it.

I’ve been tracking exports vs. President Obama’s pledge, made in January, to boost the economy by doubling exports in five years.  Here’s an update:

Obamas Goal to Double Exports, 1st year

As you can see, we’re beginning to fall behind on this goal.  For the first time since making this pledge, exports have been below the goal for two months in a row.  Of course, rising exports don’t help the economy at all if imports rise at the same rate or faster.  So the real goal is to reduce the trade deficit.  Let’s see how we’re doing there:

Balance of Trade

We see a nice improvement from June’s horrible performance but, aside from July, the trade deficit has steadily worsened. 

During the campaign, the president promised to renegotiate NAFTA to correct inequities with Mexico.  He also promised to improve our balance of trade with China by forcing them to unpeg their currency from the dollar.  He’s broken his promise on NAFTA and, since he took office, the value of the yuan has actually gotten worse, falling instead of rising since China “officially” decided to let the yuan float.  The president need look no further than his failure to act on the trade deficit for the state of the faltering economy and stubbornly high unemployment.  If this trend continues, as it almost surely will, both the economy and unemployment are going to worsen in the coming months.


3 Responses to Decline in Imports of Consumer Goods Leads Trade Deficit Lower

  1. Mark Hall says:

    Did you notice that our “net” oil imports for July were LESS than our “net” Chinese imports for July?

    Maybe we imported 2 million ($4,000 each)”super duper energy saving” green batteries from China in July.

    Would these fall under the “Coal” import category or the “Petroleum” import category?

  2. MikeF says:

    A couple of comments; We export some low grade sour crude that we lack the ability to refine. The sweet crude is not exported in most instances.

    Exports must be measured with greater scrutiny that simply reporting current dollars and Pete is doing a great job in pointing that out.

    Finally; certainly a dandy depression of enduring quality would lessen imports, but we tried it once back in the 30s and it didn’t catch on with the citizenry.

  3. Peteopolis says:

    “…than his [Presidents] failure to act”

    What do you expect? When the government says “Lets audit the Federal Reserve” and The Federal Reserve responds “No you cannot”…then who do you think is really in charge? The little man is stuck with deflationary depression.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s

%d bloggers like this: