The seasonally adjusted trade balance deficit in June 2011 grew by $2.3 billion following a rise of $6.6 billion in May. This comes as no surprise to Econintersect as we warned that the sea container counts fell in June 2011 (analysis here).
Imports decline was literally 100% due to lower prices of crude and crude based products. Please note that Econintersect’s analysis is based on unadjusted data while the headlines are based on seasonally adjusted data.
The export decline was due almost equally to decline in value of food commodities, manufactured industrial goods (not airplanes), and processed oil products. It is the second item – manufactured industrial goods such as engines, machines, electrical apparatus and generators – which is indicating a global slowdown is underway. These items are investments in means of production.
Overall, exports have been at record levels for the last 10 months, but imports have also been at record levels for 5 of the last 7 months. But there is a clear deterioration in exports.
The real news is that the balance of trade is now within the historical pre-recession range. Trade is a real indicator that the economy is weakening.
As long as trading partners are still expanding, the growing trade balance deficit tells us the U.S. economy is not contracting. Trade is the litmus test of an expanding or contracting economy.
Trade & Recessions – Missing the Forest for the Trees by Steven Hansen
The importance of Exports and Services Trade Re-evaluated by Henrik Isakson
An Alternate View of the Trade Balance Trend by Steven Hansen