As announced by the Bureau of Economic Analysis on Tuesday, America’s trade deficit dropped sharply in June, surprising everyone. It fell by $9.9 billion, or 22%, from $44.1 billion in May to $34.2 billion, the lowest level in years. The decline was due to a $5.8 billion decline in imports and a $4.1 billion rise in exports. Here’s a chart of our total balance of trade: Balance of Trade.
June’s decline continues a trend that began a year-and-a-half ago, after the trade deficit hit its worst level of the Obama administration in January, 2012 – $51.4 billion. A falling trade deficit is always great news, but it’d be better news if it was due to a decline in imports of manufactured goods, which is where job creation is to be found. But that’s not the case. Nearly all of the decline is due to falling oil imports and, to a lesser extent, an increase in the services surplus. Although the trade deficit in manufactured goods also fell in June by $5.6 billion, the long term trend for that category of goods has been worsening. Here’s the chart: Manf’d Goods Balance of Trade.
Exports of manufactured goods rose slightly in June, following a drop in May. In the last two months, manufactured exports have risen by $1.3 billion, less than half the increase of $3.1 billion needed to keep pace with the president’s promise to double exports by January, 2015. In fact, for the first time since the president made that promise in January, 2010, if manufactured exports had kept pace with that promise, America would actually have recorded an overall trade surplus in June. Here’s the chart: Manf’d exports vs. goal.
Falling imports would be better news if it were due to a rise in domestic manufacturing. But that doesn’t seem to be the case. Other economic data shows a manufacturing sector that continues to muddle along. Employment in manufacturing has been flat for a year now. Instead, falling imports may be for another reason – the kind of cut in consumer spending that portends a coming recession.