For all intents and purposes the trade data this month was flat – not much change from last month on either imports or exports and that was somewhat surprising to analysts who had started to see more consumer activity in the US and Europe as well as some signs of renewed growth in the Chinese manufacturing sector. US exports fell just slightly – by 0.1% and imports stayed right where they had been. The expectation was that imports would start to recover as this is the start of the holiday spending season and the vast majority of what fills the stores this time of year is imported from around the world – mostly from the low production cost nations like China and India. This has not been taking place all year as the paltry volumes at the ports will attest. The US consumer is simply not in the mood and it may be getting too late for a changed attitude to have any impact at all. The retailers have made their decisions and they will be heading into the season in an “inventory light” position – just as they have for the last three years. Even if the consumer should suddenly get the urge there is not going to be that much available to purchase and thus far there is no sign of this year’s “must have” product.
The decline in export demand from the US is related to some of the industrial slowdown that has been taking place in Asia as well as the continued struggle for Europe to rebound. The US manufacturer accounts for 60% of the export total for the US and the vast majority of these manufactured exports are going to business purposes. The US is generally not an exporter of consumer goods. The bulk of the export base for the US is industrial goods as well as agricultural commodities and services. The dollar has been low enough to provoke continued demand so that is not the culprit. The simple answer to the question of why exports have been declining a little is that the customer for the US output is struggling and they just aren’t buying much of anything from anybody. The fact is that Germany and Japan are also seeing declines in exports and for exactly the same reason.
One of the more surprising developments of the last year or two is the emergence of the US economy as the healthiest of the major global economies. Growth rates are higher in the US than they are in Europe or Japan and the UK. One can even argue the US is growing slightly faster than the Chinese if one accepts the premise that 6% growth is tantamount to recession in China and compares to zero growth in the US. If China is growing at 7.4% and 6% is recession the Chinese could be said to be growing at just 1.4% and the US is sporting a 2.5% growth rate (at least in the second quarter).
Analysis – The role of trade becomes more important every year as far as the US economy is concerned. The fact is that much of the US market is saturated and there is simply not going to be enough domestic consumption to grow the economy fast enough to address issues of debt and deficit and chronic unemployment. The US has to become as adept at getting into new markets as rivals like Japan or Germany or China for that matter. This is far easier said than done and it will take major cultural shifts on the part of the government, education and the business community itself.
Courtesy Dr. Chris Kuehl, Armada Corporate Intelligence
