Friday, November 11, 2011

Breaking Down Trade

While the U.S. still imports MUCH more than we export ($43.1 billion more in September alone to be exact), the trend has shown positive signs. The below chart outlines the year-over-year change in the real (adjusted for inflation) level of imports and exports, broken out by petroleum and non-petroleum trade. Note that an increase in exports is shown as a positive contributor below, while an increase in imports is shown as a detractor.

What can be seen:
  • The pace of growth in non-petroleum imports is down significantly over the past year
  • The pace of growth in non-petroleum exports is relatively flat over that time
  • Petroleum imports are actually down in real terms (i.e. we are importing less)
  • The net change is actually positive (i.e. trade is a positive contributor to GDP)

The good news is that this net decline in trade balance has not been met with reduced consumption (i.e. it is not a reflection of reduced aggregate demand). Potential bad news is that petroleum trade is down (good for the long-term independence of the U.S., but a potential short-term signal of an issue - see Bonddad Blog for further detail) and that trade is down not because we are consuming goods made in the U.S., but rather because businesses paused on rebuilding inventories (see here).

In other words, it seems we are simply consuming past imports, thus when inventories are rebuilt, the above "should" revert to negative territory unless aggregate demand collapses. Something else to keep an eye.

Source: Census

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