January's Trade Off to a Bad Start; On Track to Knock a Half Point Off Q1 GDP

Our trade deficit rose by 2.2% January, while the net value of both our exports and our imports decreased.  The Census report on our international trade in goods and services for January indicated that our seasonally adjusted goods and services trade deficit rose by $1.0 billion to $45.7 billion in January from a December deficit which was revised from $43.4 billion to $44.7 billion, as our December exports were revised down by $1.3 billion from last month's report.  The value of our January exports fell by $3.8 billion from there to $176.5 billion on a $4.0 billion decrease to $116.9 billion in our exports of goods and a $0.2 billion increase to $59.6 billion in our exports of services, while our imports fell $2.8 billion to $222.1 billion on a $2.9 billion decrease to $180.6 billion in our imports of goods and less than a $0.1 billion increase to $41.5 billion in our imports of services.   Export prices averaged 0.8% lower in January, so the real growth in exports was greater than the nominal dollar value by that percentage, while import prices were 1.1% lower, similarly incrementally increasing growth in real imports from the dollar values reported here...

The January decrease in our exports of goods resulted from lower exports of capital goods, industrial supplies, consumer goods and foods and feeds, and was only offset by a $19 million increase in our exports of automotive vehicles, parts and engines.  Referencing the Full Release and Tables for October (pdf), in Exhibit 7 we find that our exports of capital goods fell by $1,214 million to $42,801 million on a $432 million decrease in our exports of oilfield drilling equipment, a $383 million decrease in our exports of civilian aircraft, a $368 million decrease in our exports of telecommunications equipment and a $274 million decrease in our exports of industrial engines..  Our exports of industrial supplies and materials fell by $932 million to $31,498 million on a $737 million drop in our exports of fuel oil, a $460 million drop in our exports of non-monetary gold, and a $180 million decrease in our exports of fertilizers, which was only partially offset by a $297 million increase in our exports of organic chemicals and a $350 million increase in our exports of other petroleum products.  At the same time, our exports of consumer goods fell by $839 million to $15,979 on a $650 million drop in our exports of artwork and antiques and a $126 million decrease in our exports of gem diamonds and our exports of foods, feeds and beverages fell by $472 million to $9,429 million on a $337 million drop in our exports of soybeans.  In addition, our exports of other goods not categorized by end use fell by $440 million to $4,365 million....

Exhibit 8 in the Full Release and Tables gives us seasonally adjusted details on our imports and shows that lower imports of industrial supplies and materials and capital goods together more than accounted for the January decrease in our imports..  Our imports of industrial supplies and materials fell by $2,076 million to $34,567 million on an $1,848 million drop in our imports of crude oil, a $233 million decrease in our imports of iron and steel mill products, and a $224 million decrease in our imports of non-monetary gold..  Our imports of capital goods fell $1,811 million to $47,947 million on a $911 million drop in our imports of civilian aircraft, a $404 million decrease in our imports of telecommunications equipment and a $328 million decrease in our imports of computers.  At the same time, our imports of consumer goods fell $108 million to $47,876 million on a $722 million drop in our imports of pharmaceutical preparations and a $191 million decrease in our imports of furniture which was partially offset by a $626 million increase in our imports of cell phones and similar household goods, and a $164 million increase in our imports of photography equipment.  In addition, our imports of goods not categorized by end use fell by $134 million to $7,068 million.  Meanwhile, our imports of automotive vehicles, parts and engines rose $508 million to $30,584 million on a $356 million increase in our imports of trucks, buses, and special purpose vehicles and a $236 million increase in our imports of parts and accessories, and our imports of foods, feeds, and beverages rose by $161 million to $10,742 million on a $129 million increase in our imports of alcoholic beverages (not including wine)...

The revised $1.3 billion increase to December's trade deficit will have an impact on 4th quarter GDP, but to properly assess that we'd have to take each changed component, which include a $1.0 billion downward revision to exports of services, a $0.3 billion downward revision to exports of goods, a 0.3 billion upward revision to imports of services, and a $0.2 billion downward revision to imports of goods, and adjust them for inflation vis-a-vis third quarter prices.  For now, we'll forego all that detailed computation and just estimate that the reduction in net December exports will subtract about 0.04 percentage points from previously reported 4th quarter GDP....

To assess the impact of January trade on 1st quarter growth figures, we should similarly first adjust the value of January imports and exports for inflation and then compare those figures to the similarly adjusted 4th quarter figures.  However, exhibit 10 in the pdf for this report gives us monthly goods trade figures by end use category and in total, already adjusted in chained 2009 dollars, the same inflation adjustment used by the BEA to compute trade figures for GDP, albeit they are not annualized here.  From that table, we can estimate that 4th quarter real exports of goods averaged 118,760 million monthly in 2009 dollars, while inflation adjusted January exports were at 116,023 million in the same 2009 dollar quantity index representation.  Annualizing the change between the two figures, we find that January's real exports are running at a 8.9% annual rate below those of the 4th quarter, or at a pace that would subtract about 0.75 percentage points from 1st quarter GDP.  In a similar manner, we find that our 4th quarter real imports averaged 178,901 million monthly in chained 2009 dollars, while inflation adjusted January imports were at 177,996 million.  That would indicate that so far in the 1st quarter, our real imports have decreased at a 2.01% annual rate from those of the 4th quarter...since imports subtract from GDP because they represent the portion of consumption or investment that occurred during the quarter that was not produced domestically, their decrease at a 2.01% rate would thus add about 0.25 percentage points to 1st quarter GDP.  Hence, if the January trade deficit is maintained throughout the 1st quarter, our deteriorating balance of trade in goods would subtract about 0.50 percentage points from the growth of 1st quarter GDP.  Note that we have not computed the impact of the less volatile change in trade in services here because the Census does not provide inflation adjusted data on those and we don't have easy access to their price changes..



(NB: the above was excerpted from my weekly summary at Marketwatch 666)

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