Tuesday, June 4, 2013

The US trade deficit - a mixed picture

Although the US trade deficit widened in April, the number ended up being better than expected. Furthermore, the March trade deficit was revised lower than originally reported.

Source: Econoday

While this result is certainly a positive for the US economy, longer-term trade dynamics paint a different picture. The good news is that the US net imports of oil are declining, as the nation's production ramps up (see discussion). The bad news is that the longer term trend in non-petroleum merchandise trade shows an increasingly larger deficit. Americans have not lost their taste for foreign made cars, phones, etc.
USA Today: - Imports grew ... 2.4% to $227.7 billion. Sales of foreign cars increased to $25.5 billion. Americans also bought more consumer goods, led by big gain in foreign-made cell phones.
It means that in the future, should fuel production in the US stumble for some reason, trade deficit will spike.

Source: JPMorgan 

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