Okay, first I need to brag as I pretty much nailed we'd see a relative strength in exports (and the dollar) in this DECEMBER 8TH post.
Now that I got that out of the way, Marketwatch reports:
Imports into the United States fell sharply again in February and the U.S. trade deficit narrowed to $26 billion, the smallest since 1999, the Commerce Department reported Thursday. Imports of goods and services fell 5.1% to $152.7 billion, the lowest in more than four years. Exports of goods and services rose 1.6% to $126.8 billion, the first increase since July. The February deficit was much smaller than the $36.2 billion forecast by economists surveyed by MarketWatch. After adjusting for price changes, the real trade gap in goods fell in February to the lowest level since May 2001.
Trade Balance
Import / Export Breakdown by Goods / Services
Trade Balance by Goods / Services
Source: Census
Since this is my Friday this week I must be looking for a good-old EconomPic debate to pass the time:)
ReplyDeleteWhy is it good that we are importing less? What is the relevance of an invisible political border? I like the analogy of states. If it was all of a sudden declared that New York could no longer import beef from Texas would that be a good thing? Of course not, because Texas can produce beef at a much cheaper cost than New York. The same analogy holds true for national borders: if China can produce dinner plates more cheaply than someone in the US, why not import them? It's mutually beneficial. Instead New Yorkers pay a higher price for the beef they consume, just as we would pay a higher price for whatever goods we used to buy from China.
Suppose that all of a sudden it was declared that inter-country trade was barred. Would anyone be better off? And that doesn't even address the problems associated with the trade balance measure itself. This article by Hal Varian is a great example of the shortcomings of the measurement itself.
If we were importing the same kinds of things that we exported, I think AJK would be exactly right.
ReplyDeleteBut I would say that much of what we import is cheap, frivolous crap. Things that we buy to play status games, or because we had to have the same cheap electronic gizmos our neighbors just bought.
The fact that imports dropped so quickly suggests to me that this is true - that we do not need much of what we import - that we simply buy it because culturally, we are expected to.
But the rules changed, and now everyone is reducing their conspicuous consumption. I think the drop in imports reflects that.
And honestly, if Americans are spending less on random crap, and spending more on shoring up their personal balance sheets or improving their personal skillset, I think that's a good thing for the nation.
and if the people of New York stopped buying cases full of replicas of the Alamo from Texas, and instead used that money to shore up their personal accounts & skillset, I would say that would be a good thing for the people of New York.
This is not to say that buying Alamos-by-the-gross is "wrong". I think it's just foolish. And yes, it may cause warehouses in Texas to fill up with Alamos, and the Alamo-producing factories in Texas may have to furlough workers, but in a down economy, choosing personal-investment over status competition seems like the sensible choice.
it's my "friday" as well, but unfortunately need to do the same amount of work today that i'd normally due in a thurs-fri period...
ReplyDeletein terms of the global economy, you may be right, but i personally live and work in the u.s., thus this is good news for me. in addition, a huge trade deficit is in most cases NOT sustainable in the long run, thus a reversal to a more "normal" state is also a good thing.
i also agree with geek vador. a lot of what was imported is not necessarily needed and/or was overpriced due to the commodity bubble we experienced. you can see that in the breakdown between the change in goods and services. imports and exports of services (i.e. needed items) have held up considerably well as compared to exports.
just a quick thought, but wanted to at least take part in the "pass the time" activity...
here is an interesting post by brad setster:
ReplyDelete"the u.s. is exporting its recession (by not importing)"
http://blogs.cfr.org/setser/2009/04/09/the-us-is-exporting-its-recession-by-not-importing-the-february-trade-data/