Exports And Imports Manage Small Monthly Gains

Global trade is on the edge of contraction, evident in many trade reports across Europe and Asia and that includes the US as well. Exports managed only a 0.2 percent monthly gain in August with the three-month moving average, at $207.2 billion, down 0.9 percent from a year ago. This average started to move into the negative column in May. Imports rose 0.5 percent in August with this three-month average, at $262.0 billion, still in the year-on-year plus column, also at 0.5 percent, but moving in the wrong direction and down from 0.9 percent in July.

For GDP, the level of exports and imports doesn't count, it's there relationship that does and this is largely neutral right now. September's deficit of $54.9 billion lifts the third-quarter monthly average to $54.5 billion which is up but not dramatically from a $54.0 billion monthly average in the second quarter. With one month still to go, net exports look to be a possible negative for third-quarter GDP.

The steady rate of the US deficit has been masking structural improvement in the petroleum deficit, which used to be of the greatest significance but has become, due to domestic oil production, marginal, in fact the lowest on record in August at only $0.3 billion. Another low, and this an unwanted one, is a two-year low in capital goods exports, down $1.4 billion in the month to $44.3 billion in what will underscore concerns over global business investment and declines for US aircraft.

The trade gap in goods with China narrowed by $1.0 billion in August to $31.8 billion, but the level nevertheless is much larger than $20 billion monthly gaps earlier in the year. Note, however, country data are not adjusted for seasonal and calendar effects which makes immediate conclusions hard to draw.

A conclusion not hard to draw is that cross-border trade is constricting which poses risks to the US manufacturing base, a risk the Federal Reserve has targeted specifically and has been attempting to offset through rate cuts.