July Goods Trade Deficit Sets All-Time Record

September 12, 2008

http://www.reuters.com/article/ousivMolt/idUSN1139320120080911

Remember last month, when the decline of the trade deficit to $56.8 billion was ballyhooed as evidence that the falling dollar was beginning to reverse the deficit?  Well, barely mentioned in the release of the July deficit is that the June deficit was understated by $2 billion.  Oops!  This is typical game-playing by the government – releasing phony data that gets headlines and lots of attention, and then quietly revising it the following month when no one even notices. 

This linked Reuters article reports on the July trade deficit, which widened to $62.2 billion, a 16-month high.  All of the emphasis in the article is on the deficit in oil and on gains in exports.  Nowhere is it mentioned in the article that the overall deficit in goods hit an all-time record in July of $74.9 billion.  Nowhere in the article is it mentioned that imports of goods hit an all-time record, more than off-setting the rise in exports.  (Imports of goods rose $8.1 billion from June, while exports rose only $4.5 billion.)  You’d have to go to the Census Bureau web site to find these hi-lites.  Here’s the link:

http://www.census.gov/foreign-trade/statistics/highlights/monthly.html

Yes, the non-oil goods deficit declined to about $30 billion in July, a significant decrease from the $38.5 billion rate it had been running in 2006.  But the decrease is not due to a rebound in domestic production.  Domestic manufacturing activity continues to decline.  Rather, the drop in the non-oil goods deficit is due to the overall slow-down (recession, actually) in the economy.  Relying on recession to improve the trade balance is not the right way to go about it! 

But none of this detail is included in the news reports.  Instead, what the globalization cheerleaders feed us is a lot of happy talk about rising exports, hoping you’ll forget that exports are meaningless if you don’t also consider imports.  It’s the overall balance that matters.  Look at your bank statement.  Do you just look at deposits and get all warm and fuzzy?  Of course not!  You go right to the bottom line.  If it’s gone down, then you start reviewing debits to see where your money went.  The trade deficit is the same thing.  Exports are deposits.  Imports are debits.  It’s the bottom line that matters. 

At least at the end of the Reuters article, there’s a quote by one U.S. senator that “gets it.” 

“That just can’t continue. It weakens our economy, reflects the movement of U.S. jobs to China and creates mounting debt that must be paid,” Sen. Bryon Dorgan, a North Dakota Democrat, said in a statement.

Let’s hope this sentiment begins spreading across Capitol Hill.  It’d better, because he’s exactly right.  This nation has been completely bankrupted by our trade deficit, and it can’t go on much longer.


June Trade Deficit: Bad News and Good News for All the Wrong Reasons

August 13, 2008

http://www.usatoday.com/money/economy/2008-08-12-trade-deficit_N.htm

The linked article reports on the U.S. trade deficit for June, released by the Census Bureau yesterday.  The good news is that it wasn’t as bad as Wall Street had expected.  The bad news is that it’s still really bad – $56.8 billion drained from our economy in only one month, continuing a trend dating back to 1975.  Since that time, the cumulative trade deficit is approximately $9 trillion.  Gee, do you think the U.S. economy could use that $9 trillion right about now?
 
Back to the June data.  The good news is that exports set a new record.  The bad news is that so did imports.  Records are set almost every month, thanks to inflation.  Also, the bad news is why exports rose – not because of a rebirth of manufacturing in the U.S., but due to soaring grain and oil prices.  
The bad news is that the deficit in oil imports hit a new record, thanks to a record increase in the price of oil.  The good news is that the deficit isn’t quite as bad as the article would have you believe.  
Imports also rose to a record of $221.2 billion, up 1.8% from the May level. But the increase was driven by a 14.6% surge in petroleum imports, which hit an all-time high of $44.5 billion as crude oil prices jumped to record levels.
What they’re not telling you here is that, because the U.S. also exported $8.2 billion of petroleum products, the deficit in oil was $36.3 billion – an annual rate of $438 billion.  
The good news is that, aside from oil, the trade deficit shrank to its lowest level since 2003.  The deficit in manufactured goods was $33.7 billion – an annual rate of about $405 billion, down noticeably from last year.
The country’s goods trade deficit outside of petroleum shrank to the lowest level since February 2003. Demand for a variety of consumer products from clothing to televisions and furniture has weakened, reflecting the sharp economic slowdown in the United States
The bad news is why imports shrank – not because manufacturing is returning to America but because America’s economy is in such terrible shape that demand is down – not just for imported products but for American products too.  A recession isn’t exactly the most effective way to reduce the trade deficit.  We want to reduce it by bringing our manufacturing jobs home, not by destroying Americans’ purchasing power.  
With this slow-down in imports, the recession will now begin spreading to our exporters.  Soon they’ll be cutting costs and cutting prices to recover their shrinking sales volume.  I’ve been predicting another Asian currency valuation crisis, and this may be the catalyst that kicks it off.  (See “The Start of a New Asian Financial Crisis?“)
Finally, expect the trade deficit to rise again next month.  We’ll never see any meaningful reduction until the U.S. returns to sensible trade policies that utilize tariffs to assure a balance in manufactured goods and until the U.S. comes up with an energy policy that frees us of our dependence on foreign oil.  (Halting the exporting of oil would be a good place to start.)

Manufacturing Fell Off a Cliff in the Last Month

February 15, 2008

http://eresearch.fidelity.com/eresearch/goto/markets_sectors/landing.jhtml?bar=s

See my previous post about the 2007 trade deficit figure.  I’m not sure how the government is pumping up our exports figure, but none of the other manufacturing data in the economy supports it.  For example, using the link above, check out the results of the latest Fed surveys of manufacturing activity in the New York state and Philadelphia areas.  (Click that link, then go to the “Empire State Mfg Survey” release on Friday, Feb. 15th.)  Check out the graph that shows the results of the both the Empire State and Philadelphia surveys.  The trend has been down significantly for the past four years but really fell off a cliff last month! 

Pete


Rising Food Prices

February 12, 2008

http://www.usatoday.com/money/industries/food/2008-02-11-food-prices_N.htm#LogIn

Add this article to the litany of reasons for stabilizing our population.  Already the U.S. imports more food than it exports, a sad story considering that the U.S. was once known as the “bread basket to the world.”  And the acreage of land under cultivation is steadily shrinking as it is gobbled up for development.  Just two days ago I drove through a rural area east of Indianapolis and, in spite of the collapse of housing prices and tight credit, it’s amazing to see countless new subdivisions springing up in what used to be farm land. 

The march of urban sprawl is relentless.  When will our leaders wake up to what our immigration policies and population growth are doing to us?  With each passing day, the solutions to our problems – rising unemployment, dependence on foreign oil, global warming, rising food prices and declining food quality – are just that much further out of reach. 

Pete 


The Trade Deficit Worsens in November

January 12, 2008

http://www.usatoday.com/money/economy/2008-01-11-trade_N.htm

Contrary to predictions by economists of a declining trade deficit, driven by a rise in exports due to the falling dollar, the deficit worsened dramatically in November.  A month ago, after release of the October data, I predicted that the falling dollar would have no impact.  Now we have proof. 

This article does cite a 0.4% rise in exports.  However, as is always done by “blind trade” advocates, they conveniently omit the fact that imports of manufactured goods rose by more than 5%, from $38.6 billion in October to $40.6 billion in November.  The net result is a further decline in U.S. manufacturing.

Contrary to what economists have been saying, the falling dollar isn’t going to make any significant difference in this situation. The trade deficit is not driven by cost. If it were, we wouldn’t have huge deficits in manufactured goods with wealthy countries like Japan and Germany. Rather, the deficit is driven by the disparity in population density (and corresponding disparity in per capita consumption) between the U.S. and so many of our trade “partners.”

The only way to reverse the trade deficit in manufactured goods is through a tariff structure that is indexed to population density. Free trade in natural resources is fine, as is free trade between nations of comparable population density. But it is a guaranteed loser when trying to trade with over-populated nations like Japan, Germany, China, S. Korea and so many others.

Pete