Trade data for September 2011 is continuing to show a contracting trade balance deficit. The USA imported 280 million barrels of oil in September 2011 which is a reduction from the 292 million barrels imported in September 2010.
Since March 2011- the year-over-year oil consumption has been down. This reduction in the amounts of imported oil – coupled with strengthening exports are the primary reasons for the declining trade balance.
When imports grow, it is a sign of an expanding economy. Growing exports too would be a sign of an expanding global economy (or at least a sign of growing competitiveness).
The U.S. Census Bureau and the U.S. Bureau of Economic Analysis, through the Department of Commerce, announced today that total September exports of $180.4 billion and imports of $223.5 billion resulted in a goods and services deficit of $43.1 billion, down from $44.9 billion in August, revised. September exports were $2.5 billion more than August exports of $177.9 billion. September imports were $0.7 billion more than August imports of $222.8 billion.
Overall, exports have been at record levels for the last 13 months, but imports have also been at record levels for 7 of the last 10 months. There has been a downward trend in exports (the rate of year-over-year growth as growing smaller) which was reversed in August – and the improvement in the rate of growth continued in September. Two months of data is not a trend
The graph below uses unadjusted data.
Econintersect is most concerned with imports as there is a clear recession link to import contraction. Removing oil from imports gives us a more precise view of the Main Street economy. Adjusting for cost inflation allows apples-to-apples comparisons in equal value dollars between periods.
The decline in the quantities of imported oil since March 2011 is a New Normal effect. Once oil is backed out of the import data and inflation adjusted – imports are growing at 5.2% – a healthy growth not indicative of a contracting economy.
From the recent post on sea containers:
In September 2011 – import containers have contracted year-over-year. This is the fourth month in a row of contraction:
- June 2011 = -4.4% year-over-year
- July 2011 -= -2.1% year-over-year
- August 2011 = -9.4% year-over-year
- September 2011 = -3.9% year-over-year
Econintersect has evaluated the discrepancy between container counts and trade data – and concluded:
Container counts are possibly a recessionary warning signal. However, these are extraordinary times with historical data confused by a massive depression and significant monetary and fiscal intervention by government. Further containers are a relatively new technology and had a 14 year continuous growth streak from 1993 to 2006. There is not enough history to make any solid determination of what the contraction of container imports is saying.
Overall the data was not recessionary – and showed continuing domestic and global demand in September. This is a rear view look at the economy, but the trend lines are positive.
Caveats on Using this Trade Data Index
The data is not inflation adjusted. Econintersect applies the BLS export – import price indices to the data to adjust for inflation. Adjusting for cost inflation allows apples-to-apples comparisons in equal value dollars between periods.
Although Econintersect generally disagrees with the seasonal adjustment methodology of US Census, in general this methodology works for this trade data series as the data is not as noisy as the other series. Another positive aspect of this series is that backward revision have normally been very minor.
Oil prices, and also quantities of imported oil, wobble excessively year-over-year and month-over-month. In 2010, the percent of oil imports varied between 10.4% and 14.6% of the total. In 2008 the variance was between 11.5% to over 20%. No amount of adjusting – short of removing oil imports from the analysis – allows a clear picture of imports.
Contracting imports historically is a recession marker, as consumers and business start to hunker down. Main Street and Wall Street are not necessarily in phase and imports can reflect the direction for Main Street when Wall Street may be saying something different. During some recessions, the consumers and business hunkered down before the Wall Street recession hit – and in the 2007 recession the contraction began 10 months into the recession.