August Trade Deficit Jumps by 15.6%, on Pace to Subtract 0.68 Percentage Points from 3rd quarter GDP

Our August trade deficit rose by 15.6% from July as the value of our exports fell and the value of our imports rose.  The Census report on our international trade in goods and services for August indicated that our seasonally adjusted goods and services trade deficit rose by $6.5 billion to $48.3 billion in August from a July deficit which was revised from $41.9 billion to $41.8 billion.  The value of our August exports fell $3.7 billion to $185.1 billion as our exports of goods fell by $4.0 billion to $124.5 billion and our exports of services increased by less than $0.4 billion to $60.6 billion, while our imports rose $2.8 billion to $233.4 billion as our imports of goods rose by $2.5 billion to $192.4 billion and our imports of services increased by $0.3 billion to $41.1 billion.  Export prices averaged 1.4% lower in August, so the real growth in exports was higher by that percentage, while import prices were 1.8% lower, thus incrementally increasing real growth in imports by that percentage from the nominal dollar amounts reported here.  Hence, in July dollars, our August trade deficit rose to $49.9 billion, and was thus 19.3% greater than July's in real term.

Referencing the Full Release and Tables for August (pdf), Exhibit 7 reveals that a $2,189 million decrease to $35,218 million in the value of our exports of industrial supplies and materials accounted for more than half of the August decrease in our exports; that in turn was caused by a $566 million decrease in our exports of fuel oil, a $244 million decrease in our exports of plastics, a $216 million decrease in our exports of petroleum, and a $155 million drop in our exports of raw cotton, all of which saw lower prices for the month.  Other end use categories of exports that contributed to the August decrease included exports of consumer goods, which fell by $571 million to $15,755 million on a $274 million drop in our exports of jewelry and a $177 million decrease in our exports of art and antiques; exports of vehicles, parts, and engines, which were down by $499 million to $12,791 million, exports of foods feeds and beverages, which were down $269 billion to $10,403 million on a $228 million drop in our exports of soybeans; and exports of goods not categorized by end use, which were down by $592 million to $5,206 million.  The only end-use category of exports that saw an increase in August was capital goods, which were up by $139 million to $44,465 million on a $1,372 million increase in our exports of civilian aircraft, which were mostly offset by a $296 million decrease in our exports of semiconductors and decreases greater than $100 million in our exports of medicinal equipment, measuring and control devices, electrical apparatuses, computers and other industrial machines not listed separately.

Exhibit 8 in the Full Release and Tables gives us details on our imports and shows us that a $4,028 million increase to $51,850 million in our imports of consumer goods was responsible for our increased August imports, as we imported $2,103 million more cellphones, $336 million more toys, games, and sporting goods, and $283 million more synthetic textiles than we did in July; our imports of furniture, televisions, gem diamonds, pharmaceuticals, jewelry, footwear, and cotton apparel all also increased by more than $100 million each.  August also saw a $1,075 million increase to $50,339 million in our imports of capital goods, as we imported $403 million more telecommunications equipment, $214 million more generators, $213 million more computer accessories, and more than $100 million more in electrical apparatuses, medical equipment, computers and photo finishing equipment than we did in July.  Our imports of foods, feeds, and beverages also rose, by $166 million to $10,729 million, on a $138 million increase in our imports of meat products, as did our imports of goods not categorized by end use, which were up by $693 million to $7,719 million.  Partially offsetting those increases, our imports of industrial supplies and materials fell by $2,237 million to $40,080 million on a $1,177 decrease in our imports of crude oil, a $349 million decrease in our exports of fuel oil, a $437 million decrease in our imports of other petroleum products, a $266 million decrease in our imports of finished metal shapes, and $204 million decrease in our imports of gold, a $201 million decrease in our imports of copper, and large decreases in our imports of bauxite and aluminum and iron and steel mill products.   We also imported automotive vehicles, parts, and engines valued at $29,721 million, which was $386 million less automotive equipment than we imported in July...

To gauge the impact of our July and August trade figures on 3rd quarter growth, the value of July and August imports and exports must first be adjusted for price changes and then compared to the similarly adjusted 2nd quarter figures.  While the BEA would do this on an item by item basis with prices from the import export price index for those months, exhibit 10 in the pdf for this report gives us monthly goods trade figures by end use category and in total in chained 2009 dollars, the same inflation adjustment used by the BEA to compute trade figures for the GDP report, albeit they are not annualized here.   From that table, we find that 2nd quarter real exports averaged 120,343 million monthly in chained 2009 dollars, while the inflation adjusted average of July and August exports was at 120,160 million using the same 2009  dollar quantity index.  Annualizing the change between the two figures, we find that 3rd quarter real exports are running at a 0.61% annual rate below those of the 2nd quarter, or at a pace that would subtract 0.08 percentage points from 3rd quarter GDP.  In a similar manner, we find that our 2nd quarter real imports averaged 178,201 million monthly in chained 2009 dollars, while inflation adjusted July and August imports averaged at 179,929 million in those same 2009 dollars.  That would indicate that so far in the 3rd quarter, our real imports are rising at a 3.9% annual rate over those of the 2nd quarter.  Since imports subtract from GDP because they represent that portion of our consumption or investment that occurred during the quarter that was not produced domestically, that 3.9% rate of decline would subtract 0.60 percentage points from 3rd quarter GDP.  Hence, if our September trade figures are equivalent to those of July and August thus far in the 3rd quarter, our worsening balance of trade would subtract 0.68 percentage points from the growth of 3rd quarter GDP.  That is a 126 basis point reversal from our prior 3rd quarter estimate, which was based on July trade data alone..

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iPhones cause imports to soar again

(Via Jeffry Bartash of MarketWatch for Morningstar)

The increase in U.S. imports stemmed mainly from a 30% jump in cellphones and "other household goods." Cell phones account for more than half of all the revenue and most of the growth in that category.

It's now a ritual: Apple releases a new iPhone model and U.S. imports soar. That's precisely what happened in August. Millions of iPhones were shipped to the U.S. in August so retailers would be ready to start selling them in September after the official launch.

After more than a decade of explosive growth, cell phones have become one of the most heavily imported products into the United States. The value of cell-phone imports posted double-digit percentage gains from 1994 to 2008, with most companies eventually shifting production to Asia to take advantage of lower costs.

Huge spikes in cell-phone imports first became a phenomenon in 2004 after the release of the first truly iconic device of the modern era: the Motorola Razr ... but the Razr and other devices were eventually shunted aside by the breakthrough release of the first iPhone in 2007.

Cell-phone sales and imports hit new heights in 2010 after Apple put out the iPhone 4. And imports surged again in 2013 when Samsung made a killing with the vaunted Galaxy 4 (arguably the first true competitor to Apple).

Last year, cell-phone imports broke through the $50 billion barrier and are on track to easily surpass that level again in 2015. Last week, Apple said it sold 13 million new iPhones in the first three days after they went on sale — setting a new record.

That said, the iPhone is not built in America. Virtually all cell phones are manufactured in China or other low-cost Asian countries. Not surprisingly, the U.S. trade deficit with China, where most of Apple phones are made, climbed almost 15% in August.

https://www.morningstar.com/news/market-watch/TDJNMW_20151006368/deja-vu...

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that seems too incredible

Have to check that.

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the i phone mortgage connection

there is also a spike in mortgage delinquencies during the month of an iphone release; i've followed that for years...ie, 4.83% of mortgages were delinquent in August, up from 4.71% in July...apparently for some people having the latest gadget is more important than paying on their home..

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rjs

Apple's Q3 2015 earnings

Apple CEO Tim Cook said this about the company’s Q3 results:

“We had an amazing quarter, with iPhone revenue up 59 percent over last year ... and we’re looking forward to releasing iOS 9, OS X El Capitan and watchOS 2 to customers in the fall.” --- And Luca Maestri, Apple’s chief financial officer, added this: “In the third quarter our year-over-year growth rate accelerated from the first half of fiscal 2015, with revenue up 33 percent and earnings per share up 45 percent,” said Luca Maestri, Apple’s CFO. “We generated very strong operating cash flow of $15 billion, and we returned over $13 billion to shareholders through our capital return program.”

[Apple will announce Q4 2015 Earnings on October 27.]

http://9to5mac.com/2015/07/21/apple-earnings-fy15-q3/

* I mentioned this in my blog: "U.S. Trade Deficit Fueled by Corporate Tax Dodgers"
http://bud-meyers.blogspot.com/2015/10/us-trade-deficit-fueled-by-corpor...

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Apple would owe the lion's share of tax...

VIA Al Jazeera (October 6, 2015 by Tom Kutsch, Digital News Producer)
http://america.http://america.aljazeera.com/articles/2015/10/6/top-us-co...

According to a new study (released by Citizens for Tax Justice and the U.S. Public Interest Research Group Education Fund in October 2015)
http://ctj.org/pdf/offshoreshell2015.pdf

The largest 500 U.S. companies would owe an estimated $620 billion in U.S. taxes were it not for the more than $2.1 trillion in offshore cash that most of the firms hold in foreign tax havens.

Apple has the lion's share, followed by GE and Microsoft.

Last June GE’s Jeff Immelt warns that US jobs depend on Export-Import Bank. He was also one of those who urged members of Congress to support giving Obama trade promotion authority [for the TPP trade deal], saying it was essential for concluding deals with Asia and Europe that would benefit small businesses and workers.
http://www.ft.com/cms/s/0/25c69b04-152d-11e5-a587-00144feabdc0.html#axzz...

As Obama’s “Jobs Czar", Jeff Immelt had also threatened to outsource [more] bobs if the Export-Import Bank had expired.
http://libertyblitzkrieg.com/2015/06/23/crony-corporate-ceo-jeff-immelt-...

August 2015: "Now, with Congress out of session and Ex-Im increasingly a political football, Boeing [another tax dodger] and pro-Ex-Im allies like GE are changing tack, lashing out vocally, pulling political donations from opponents of the credit agency, and threatening to move American jobs overseas if Ex-Im isn’t renewed."
http://fortune.com/2015/08/25/boeing-export-import-bank/

October 2015: House GOP squabbles over reviving Export-Import Bank - "Republican leaders told their rank-and-file to hold off on such a move, and lawmakers leaving the meeting said it seems the matter might have to wait until the election of a new House speaker, scheduled for Oct. 29."
http://www.washingtonexaminer.com/house-gop-squabbles-over-reviving-expo...

Apple CEO Tim Cook said this about the company’s Q3 results: “We had an amazing quarter, with iPhone revenue up 59 percent over last year ... and we’re looking forward to releasing iOS 9, OS X El Capitan and watchOS 2 to customers in the fall.” --- and Luca Maestri, Apple’s chief financial officer, added this: “In the third quarter our year-over-year growth rate accelerated from the first half of fiscal 2015, with revenue up 33 percent and earnings per share up 45 percent,” said Luca Maestri, Apple’s CFO. “We generated very strong operating cash flow of $15 billion, and we returned over $13 billion to shareholders through our capital return program.”
http://9to5mac.com/2015/07/21/apple-earnings-fy15-q3/

Apple to Announce Q4 2015 Earnings on October 27
http://www.macrumors.com/2015/09/28/apple-q4-earnings-october-27/

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