Trade Deficit Down as Exports Rise

In a rare bit of good news on trade, as announced by the Commerce Department this week, the overall trade deficit, led by exports of U.S.-manufactured goods, fell by $14.3 billion in October to $67.1 billion. Here’s the chart: https://petemurphy.files.wordpress.com/2021/12/balance-of-trade.pdf. The decline in the deficit was due to a big jump in exports, rising by $16.8 billion to $223.6 billion, shattering the previous record of $215 billion set in May of 2018. The jump in exports was more than enough to offset a $2.5 billion increase in imports, which set a new record of $290.8 billion, the fifth consecutive monthly record.

The best news, however, is that the decline in the trade deficit was led by a decline in the deficit in manufactured goods. Here’s the chart: https://petemurphy.files.wordpress.com/2021/12/manfd-goods-balance-of-trade.pdf. Exports of U.S manufactured goods jumped by $10.3 billion to $125.5 billion, beating the previous record of $119.7 billion set only two months earlier. It was enough to offset an increase in imports of $1 billion to $207.4 billion – also a new record.

Clearly, the new records set by imports debunk the claim by some that the supply chain crisis is due in part to labor shortages caused by the pandemic at foreign manufacturers. That’s a ridiculous claim. We’ve been inundated with a flood of imports that has left warehouses stacked to the rafters.

The slowing increase in manufactured imports and the accelerating increase in manufactured exports is the best news in this report. It may be the early signs of a manufacturing revival in the U.S. and may also explain, at least in part, the “labor shortage” we’ve been witnessing. That, together with massive spending on infrastructure, have combined to attract workers to higher-paying jobs, leaving other industries that are dependent on cheap labor – like the restaurant industry (where over-building is also a likely factor) – unable to attract workers.

However, it remains difficult to draw any hard conclusion on any economic data until the dust from the pandemic and massive government stimulus spending begins to settle.

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