Is U.S. Manufacturing Renaissance Underway?

The headlines about the December trade deficit, released yesterday by the Foreign Trade division of the Census Bureau (link provided above), sound like bad news, emphasizing a larger-than-expected rise in the trade deficit.  Exports were up, but imports were up more.  Here’s the charts:

Balance of Trade          Obamas Goal to Double Exports, 1st year

But dig deeper and you’ll find some good news beginning to take shape in the data.  Most of that increase can be blamed on a boost in oil imports (with price to blame for much of it) and a corresponding decrease in petroleum exports.

The good news emerges when you strip away trade in petroleum and foods, feeds and beverages – in other words, natural resources – leaving only trade in manufactured goods.  (Yes, there are other categories of natural resources – minerals, metals and lumber, to name a few – but trade in these resources is essentially balanced.)  I’m adding a new feature to my monthly report on our progress toward Obama’s goal of doubling exports in five years.  The real goal is to double exports of manufactured products.  So I’ll begin presenting a new chart that gives a broader picture of what’s happening in the trade of petroleum products; food, feed and beverages (identified in the chart as simply “food”); and, most importantly, manufactured products. 

Manf’d Goods Balance

Imports of manufactured products have leveled off since June, while exports of manufactured goods have risen almost steadily since the beginning of 2010 at a pace sufficient to nearly meet Obama’s goal of doubling exports in five years.  The trade deficit in manufactured goods has now fallen four months in a row to its lowest level since May. 

The time has come to consider the possibility that this isn’t merely a short-term blip, but that something is actually driving a real change in trade.  There are a couple of possibilities:

  1. The slowdown in imports and rise in exports may be nothing more than the result of an economic rebound taking hold in the rest of the world, increasing demand for U.S. products, while a stagnant economy in the U.S. has kept a lid on imports.  This doesn’t seem to be a scenario likely to persist for long (if it’s even real), since so much of the world is dependent on U.S. demand. 
  2. The Obama administration’s trade talks with the rest of the world, aimed at rebalancing the global economy and boosting American exports, may have  had more teeth than I gave them credit for.  Is it possible that other nations are (at least so far) living up to commitments to boost their imports of American products?  If so, what is the source of this new demand?  Or are American products simply being stockpiled somewhere?  More likely, these new American imports are eating into domestic production in foreign countries.  How long will such under-the-table trade deals stand up to political pressure when they start eating into manufacturing employment in those countries?

I remain a skeptic, but the data speaks for itself, and we can no longer ignore the possibility that some under-the-table trade deals have sparked the beginning of a renaissance in American manufacturing.  Other economic data have suggested the same thing.  For example, the manufacturing sector of the economy added 49,000 jobs in January, more than the total number of jobs created within the entire U.S. economy. 

A few months of data, especially at a time when the economy is balanced at the edge of a double-dip precipice, isn’t proof of anything and certainly doesn’t undo three-plus decades of enormous trade deficits and the gutting of the manufacturing sector, but it’s possible that we’ve taken a step in that direction.

5 Responses to Is U.S. Manufacturing Renaissance Underway?

  1. tony N says:

    Why is it that there is Value for the Chinese and Russians to come to America and develop this , but there is No Value for Domestic Americans to develop this resource of domestic value to a retail level and sell it to realize maximum value so we can generate the maximum revenue flows and capital circulation in our USA ???
    Chinese increase oil search in US

    Chinese national company is interested in Boise ……


    Is there any truth to this video and if what they say is going on with tactics taken by the Federal Reserve are why these trade Policies are more about the Federal Reserve’s attempts at re-structuring to under pin the US dollars continuing Acceptance as having a Intrinsic value between nations trade of all resource and durables , but as they work the technicals on this the analysis in your last reporting Pete you talked about the fact that the Overall labor price squeeze caused by excessive labor pools to bargain production with around the world now even has US labor challenged as far as maintaining their standard of Living in this overall downward trend on labor costs , it would seem that even if the US picks up in exports its still a war of attrition effect and if we factor in the Inflation on Cost of Living goods that intensifies the effect of that war of attrition , right ??
    Pete if we are going to Lose our Raw Materials Resource at a level of lower than even Wholesale price to these Invaders , don’t you think given the fact that these nations are dealing with overpopulation to begin with that the attempt to appease their problem in that regard the USA is sacrificing its own vital resources in this process that if we were not involved in the business of free trade , the reserve of this resource would be more valuable and that Americans should be using this domestically over the long term rather than opening up and allowing its extractions that won’t be produced at a level to realize its maximum value to be a be return for US trade balance ?? You Know the Foreigners are Not going to come here and Help the US realize the use of this at a Maximum benefit to the US economy ….

  2. tony N says:

    Pete this makes the case for your last report on declining world labor incomes as this fundamental adds pressure to the incomes of laborers

  3. tony N says:

    The overall trend in Overpopulation is starting to show in the worlds ability to supply food sustainably

    If we would restructure our tax code to be better incentive driven to form capital around the needed Infrastructure like installing desalination plants like India is doing , , and this would set the stage for future developments of these types of Growing facilities , , to be built over a long term for the needs of alternative food productions as well as a Whole Host of other creative resource needs Like Bio Algae growing facilities

  4. tony N says:

    This is a strain on the futures markets overall view of the commodities sector too as this effects 1/5th of the USA grain supply that is overall going to affect US exports .
    Your analysis is a good meter for telling us what we need to be doing and consider the worlds Grain Yields have flat lined for the last 10 years ,

    ,this is a sign of food shortages coming as we are doing nothing to expand the capacity of supply , but if your analysis gains any exposure it could help to persuade the power that be to initiate some plans to try and expand supply and alter the course we are on that tells us we are to see Famine and the birth rate meet in the next 20 to 30 years .

    • Pete Murphy says:

      Tony, I don’t want to get into the debate about resource shortages because that’s not what my book and this blog are about. There are plenty of others out there tackling overpopulation from that perspective, and I really have nothing new to add to that argument.

      My approach to overpopulation begins by asking the question, “what if economists are right in saying that there are no obstacles to further population growth that man isn’t ingenious enough to overcome?” By “obstacles,” they mean things like resource shortages and environmental degradation. I know, it’s a preposterous position.

      If resource shortages and environmental degradation could always be overcome, then there must be something else that will come into play. Population growth can’t go on forever. What my book, “Five Short Blasts,” and my blog are about is the relationship between population density and per capita consumption – that beyond a certain point, further increase increase in population density drives down per capita consumption, drives up unemployment and poverty and, ultimately, will raise the death rate sufficiently to halt further growth – an ultimately hellish scenario. If resource shortages and environmental degradation don’t get us first, it will ultimately be unemployment and poverty that are our undoing. It’s an economic theory that counters economists’ platitudes about human ingenuity that are rooted in their refusal to consider the ramifications of population growth.

      So I’m not denying that resource shortages are a real issue. I’m just leaving that argument to others while adding an entirely new reason to be concerned about overpopulation.

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