Friday, September 10, 2010

July’s Trade Uptick: Underwhelming

The good news is that the Bureau of Economic Analysis reported yesterday that the US trade deficit decreased month-on-month from $49.8B to $42.8B in July. While monthly figures are intrinsically noisy and subject to later revision, we should be grateful for any shaft of sunlight.

Alas, on closer inspection there is little to be grateful for. First, of the $7B movement, about $4.2 is accounted for by a decline in imports. This would be fine if the US economy were growing, and the drop in imports represented expenditure-switching. The reality, however, is that growth in the US is sputtering at best, and that fewer imports reflect general weakness in spending.

The export side, which is truly critical not only to domestic recovery but also global rebalancing, is even more disappointing. Of the $2.8B increase, fully $2.3B are in civilian aircraft, an especially lumpy category.

All in all, not much to crow about.

1 comment:

spencer said...

Remember in the GDP accounts trade measures from the end of the quarter to the end of the quarter rather than the average of the three months.

In July the real trade deficit was - $47.6 B versus - $53.6 B in July.The June reading was such an outlier that it now looks like in the third quarter real GDP report that trade will actually make significant positive contribution to real GDP growth.