July 2011 Trade Balance Is a Positive Economic Indicator

With the trade data coming in line with Econintersect’s expectations based on container counts (analysis here) and the price of crude oil, trade data says the economy expanded in July 2011.

When imports (eliminating oil) grow, it is a sign of an expanding economy.  The headlines say imports declined by $0.5 billion – but oil was a $2.7 billion drag.  Imports, other than oil – expanded $2.2 billion.  A positive sign for a growing economy.

Growing exports too would be a sign of an expanding global economy (or at least a sign of growing competitiveness.  Here, exports grew $5.7 billion with the drags being commodities.  Most categories of manufactured items grew.  Seems this is a positive sign.

Overall, exports have been at record levels for the last 11 months, but imports have also been at record levels for 5 of the last 8 months. But there is a clear deterioration in the trend for exports.

The real news is that the balance of trade is now within the historical pre-recession range. Taken overall, trade data in recent months is a real indicator that the economy is weakening.

Nothing is this data (and Econintersect is on high alert) – smells recessionary.  We are not convinced the economy will continue to expand (“modestly”?), or it will recess.  This is an open question which must be asked as each new piece of data is reviewed.  So far, if surveys are correct, the only sign of a recession is that many believe the USA is already in a recession.

Related Articles:

All Articles on Trade Data

All Articles on Container Counts

One reply on “July 2011 Trade Balance Is a Positive Economic Indicator”

  1. Steve, Dan, very good analysis – unlike most media, who report The Numbers, and do not even try to understand them, you two did.

    Interestingly, Dan discusses the impacts of exported oil on total exports:
    http://www.theatlantic.com/business/archive/2011/09/chart-of-the-day-exports-soar-to-new-high-in-july/244788/
    while Steve discusses the impacts of imported oil on imports. Both valid. As is Bill’s at CRs backing oil out of both.

    Dan, you might want to take a look at Steve’s export trend chart, he sees something different – a fade out.

    What neither of you point out is the full impacts that oil has. We import about US$ 6 Billion each month from both Canada and Mexico – that’s merely US$ 144 Billion each year. Our imports literally control their balance of trade. What is NOT usually discussed – not by U.S. or by Canada or Mexico – is that we export back to them Billions of refined crude, each month/year.

    Almost half of our trade deficit is due to oil, and most of the money goes to those two countries. What we do NOT report is how much they buy back from U.S.

    If they refined their own crude for their own domestic consumption, they could save themselves Billions each month, and hundreds of Billions each year. We take their money and don’t even say thanks.

    Dan, when you ask where are the jobs, we know that you already know – exporters ARE increasing their jobs, it just gets lost in the rest of the jobs “noise”.

    Oh, and Steve, you might also like to read this one, about Canada:
    Something significant is happening to Canada’s merchandise trade
    http://www.dcnonl.com/article/id46617

    Understanding what is happening to our best – as in they don’t export as many illegal immigrants – trading partner can tell U.S. a great deal about what is happening to both then and U.S.

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