Written by Steven Hansen
A quick recap to the April 2012 trade data released today:
- Import growth has positive implications historically to the economy – and the seasonally adjusted imports were reported down slightly month-over-month. Econintersect analysis shows decline of 0.1% month-over-month.
- Exports were reported down, and Econintersect’s analysis shows exports down 3.4% month-over-month
- The market expected a trade deficit between $49.5 and $50.2 billion and the seasonally adjusted headline data from US Census came in at $50.1 billion. The Econintersect trade balance number is $61.8 (unadjusted) – and there were no unusual elements in the data.
In perspective, the current values of both imports and exports are at record levels. However, export growth rates (using the unadjusted data) have declined lower than the channel they have maintained since mid-2011 – which likely is indicating a deteriorating global economy.
Please note that this data release has included the BEA’s annual revision. The effects of this revision cannot be observed on the graphs Econintersect normally presents.
In this news release and in the accompanying “U.S. International Trade in Goods and Services: Annual Revision for 2011” release, the U.S. Census Bureau (Census) and the U.S. Bureau of Economic Analysis (BEA) are publishing revised statistics on both U.S. trade in goods and U.S. trade in services for January 2009 to March 2012. The revised statistics will also appear in “U.S International Transactions: First Quarter 2012” and in the annual revision of the U.S. international transactions accounts, both to be released by BEA on June 14, 2012.
This annual revision has not changed the overall trend in the goods and services balance. On an annual basis, the goods and services deficit was revised down 0.6 percent for 2009, was revised down 1.1 percent for 2010, and was virtually unrevised for 2011. The goods deficit was revised down for 2009 and 2010 and up for 2011; the services surplus was revised up for all three years. These revisions reflect newly available and revised source data and minor improvements to estimation methodologies.
Growing exports is a sign of an expanding global economy (or at least a sign of growing competitiveness). From the press release:
The U.S. Census Bureau and the U.S. Bureau of Economic Analysis, through the Department of Commerce, announced today that total April exports of $182.9 billion and imports of $233.0 billion resulted in a goods and services deficit of $50.1 billion, down from $52.6 billion in March, revised. April exports were $1.5 billion less than March exports of $184.4 billion. April imports were $4.1 billion less than March imports of $237.1 billion.
In April, the goods deficit decreased $2.7 billion from March to $64.8 billion, and the services surplus decreased $0.1 billion from March to $14.8 billion. Exports of goods decreased $1.5 billion to $130.7 billion, and imports of goods decreased $4.1 billion to $195.5 billion. Exports of services decreased $0.1 billion to $52.2 billion, and imports of services increased $0.1 billion to $37.5 billion.
The goods and services deficit increased $6.5 billion from April 2011 to April 2012. Exports were up $7.2 billion, or 4.1 percent, and imports were up $13.8 billion, or 6.3 percent.
Econintersect Analysis Based on Unadjusted Data
Overall, exports have been at record levels for the last 20 months, but imports have also been at record levels for 14 of the last 17 months. 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.
As shown in the above graph:
- import growth with oil have been trending up since mid-2011
- import growth less oil (red line above) has dropped below its trend channel. One month of bad data is not a trend.
- Exports (blue line) fell significantly this month, likely indicative of a cooling global economy.
I would not consider the data excellent this month with the deterioration of exports. The seasonally adjusted numbers the BEA has reported makes the trade data look better than what it is for exports. Note: This is a rear view look at the economy.
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 – total exports, total imports, and imports less oil. 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 U.S. Census, in general this methodology works for this trade data series as the data is not as noisy as other series. Another positive aspect of this series is that backward revision has usually been very minor.
Econintersect determines the month-over-month change by subtracting the current month’s year-over-year change from the previous month’s year-over-year change. This is the best of the bad options available to determine month-over-month trends – as the preferred methodology would be to use multi-year data (but the New Normal effects and the Great Recession distort historical data).
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, consumers and businesses hunkered down before the Wall Street recession hit – but in the 2007 recession the Main Street contraction began 10 months after the recession officially started. [Graph below is updated through 3Q2011.]