Wednesday, February 11, 2009

U.S. Trade in Goods Crashing = Contraction of Trade Deficit

Marketwatch reports:

The U.S. trade balance fell to a six-year low in December as the global market for U.S.-made goods shrank at a record pace while Americans also decreased their appetite for imports, the Commerce Department reported Wednesday. The trade gap - the difference between imports and exports of goods and services - fell to a seasonally adjusted $39.9 billion in December, the lowest in nearly six years, from a revised $41.6 billion in November.

The huge change was due to the trading of goods (services held up well, which makes you wonder how bad things would be in the U.S. had we not shifted so dramatically towards a service based economy over the past few decades).

Taking a closer look at both exports and imports of goods, we see a huge drop in both. Important for the trade balance, imports are falling faster than exports AND are falling from a higher denominator (i.e. the reason the U.S. trade deficit is contracting sharply).

Source: Census

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