"Economists are pessimists: they've predicted 8 of the last 3 depressions."
--Barry Asmus

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Thursday, May 10, 2012

International Trade

International Trade is the shorthand for the U.S. International Trade Deficit[1], a measure of how much we import vs. how much we export.  If the number is positive, that means we're exporting more than we're importing.  If it's negative, then it's the other way around.  The report is lagging, looking at the balance from two months in the past.
This metric is huge, mostly because it directly influences that biggest of all economic big dogs, Gross Domestic Product.  GDP is, by definition, private consumption plus private sector investments plus government spending plus (exports minus imports).  So, if we're exporting more than we're importing, that's a boost for the economy.
Again, we haven't had a trade surplus since 1975. So our trade balance has been a drain on the U.S. economy for 37 years.  By definition.
February saw a trade balance level of $-46.0 billion.  The Econoday-surveyed analysts are bearish for March, expecting to see the trade deficit expand to $-49.5 billion.  And to find out if they are right, we turn to the US Census Bureau.
The title of the article, Goods and services Deficit Increases in March 2012 is, at best, an inauspicious beginning.  But hey, the analysts were expecting that.  What they weren't expecting was for the trade deficit to increase to not $-49.5 billion but to $-51.8 billion.  We did see a $5.3 billion increase in overall exports (which is good), driven primarily by exports of industrial supplies and materials ($2.4 billion increase) and capital goods ($1.2 billion increase).  Imports increased by $11.7 billion, driven by capital goods ($3.5 billion increase), consumer goods ($3.3 billion increase), and industrial supplies and materials ($2.5 billion).
[1]  Technically, that should be U.S. International Trade Balance.  But we haven't had a trade surplus since 1975.

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