U.S. Balance of Trade in Manufacturing in Free-Fall

The April trade report, released by the Bureau of Economic Analysis yesterday, was about as bad as it gets.  It jumped by $3.0 billion to $47.2 billion, its worst level in two years.  But dig into the details and it gets even worse.  The trade deficit in manufactured goods soared to $48.9 billion – an all-time record.  Check out this chart of our balance of trade in manufactured goods:  Manf’d Goods Balance of Trade.

As you can see, our balance of trade in manufactured goods is in a state of free-fall.  There’s just no other way to describe it.  Manufactured exports fell by $0.7 billion in April while imports rose by $3.1 billion.  Contrary to President Obama’s goal of doubling exports by January of next year (as compared to five years earlier), exports have actually been stagnant for two years.  (Here’s the chart:  Manf’d exports vs. goal.)  Almost 4-1/2 years into his plan, manufactured exports have risen a meager 29%, and all of that has much more to do with the global rebound in trade following the recession than anything resembling an “American manufacturing renaissance” that we keep hearing about.  Imports have risen far more.  In other words, as the rest of the world economy recovers, America’s share of the market continues to decline.

The stage is being set for the next recession.  With both federal deficit spending and Federal Reserve stimulus shrinking to a level that is now lagging the trade deficit, we’re beginning to experience once again a net drain of money from the economy.  In the past, every time that’s happened, a recession soon followed.  We’ll soon see.

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