August 10, 2006
The June 2006 Trade Figures
Persisting trends, for now
The BEA/Census released the June trade figures this morning. The actual $64.8 billion deficit for June (seasonally adjusted figure) was only slightly larger than consensus of $64.5 billion. Consequently, the release was -- as far as I can tell -- taken as "no big news". Here's Bloomberg's coverage:
U.S. Economy: Trade Deficit Narrows as Exports Rise (Update2)
Aug. 10 (Bloomberg) -- The U.S. trade deficit narrowed in June as exports rose to a record, helped by a pickup in economic growth abroad and a weaker dollar.
Imports exceeded exports by $64.8 billion, following a $65 billion gap in May that was larger than previously reported, the Commerce Department said today in Washington. American imports of cars and consumer goods such as televisions and clothes also increased.
Quickening economic expansions in Europe and Asia are spurring demand for business equipment including computers and aircraft engines. At the same time, a rising oil-import bill along with consumer appetite for foreign-made goods makes a substantial improvement in the deficit difficult.
"The gap between export and import growth is going to have to widen further if the trade balance is going to turn around, but at least it appears to be stabilizing for the time being," said Michael Gregory, an economist at BMO Nesbitt Burns Inc. in Toronto.
Below is a graphical depiction of the time series, in millions of dollars, and as a proportion of GDP.
Figure 1: Total goods and services trade balance and total ex petroleum and petroleum products imports, seasonally adjusted. Source: BEA/Census, June 2006 release.
Figure 2: Total goods and services trade balance and total ex petroleum and petroleum products imports, seasonally adjusted, as a proportion of interpolated nominal GDP. Source: BEA/Census, June 2006 release, and BEA July 28 NIPA release.
One noteworthy point is that the non-oil trade deficit has continued its stabilization in nominal terms (as mentioned in my post on the May 2006 trade figures), so in terms relative to GDP, it has fallen.
One interesting point highlighted by the article is the surge in exports. I will say that it is hard for me to see in the time series of exports and imports plot, shown in Figure 3 below.
Figure 3: Total goods and services trade balance and total ex petroleum and petroleum products imports, seasonally adjusted, as a proportion of interpolated nominal GDP. Source: BEA/Census, June 2006 release, BEA July 28 NIPA release, and author's calculations.
On the other hand, you can see a narrowing when omitting oil imports. Of course, it looks like you need a lot more acceleration of export growth or deceleration of import growth, to get the lines to cross.
Relatedly, the trend in the value of oil imports remains of interest. The apparent stabilization in the real quantity of oil imports (measured using the official chain deflator for petroleum and petroleum related products) contrasts strongly with the value series, although imports (both quanta and values) may rise with the news coming out of Alaska, even after ignoring the possibility of another hit to oil production in the Gulf coast.
Figure 4: Quantity of petroleum and energy related petroleum product imports, in 2000Ch$, seasonally adjusted. Sources: BEA/Census June 2006 release.
[late addition, 2:50 pm Pacific]
So what are my "take-away" points?
- Don't read too much into one month's growth rates. Yes, nominal exports of goods rose by 35% on an annualized basis, and nominal goods imports rose only 14%. But it's the trends that matter, and over the past three months, exports have risen 20% verus imports by 18%... (again, annualized, log basis).
- Oil prices remain the big mover in the aggregate trade balance.
Posted by Menzie Chinn at August 10, 2006 10:03 AMdigg this | reddit
By any chance have you posted this half way and going to complete this later?
There is no conclusion to the post. Just two graphs and two observations that even my secretary read in bloomberg when she accidentally opened it this morning.
Posted by: Benny at August 10, 2006 01:12 PM
Benny: Thanks for the inquiry. Nope, that's it. Sometimes I have limited imagination, and can't think of much to add. The point is that non-oil trade balance to GDP is stabilizing. The problem remains oil. But if there is a bigger "take-away", it is: Don't be bowled over by the talk of surging export growth. It ain't there, if one takes the longer perspective, which is why Figure 3 is of interest to me (maybe you look at these pictures a lot more, and it's obvious to you). Perhaps I was unclear, so I'll add a conclusion.
Posted by: Menzie Chinn at August 10, 2006 01:47 PM
Thanks for the reply. I think the "take away" part is what people look for in the posts.
Yes, surging export growth ain't gonna be there particularly when US economy (and world as a whole) is slowing.
Damn, would have been a little nicer if USD was down. It continues to hold its line making Stephen Roach go sleepless.
Posted by: Benny at August 10, 2006 01:58 PM