from Follow the Money

The May trade data (abbreviated)

July 12, 2007

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I am a bit pressed for time today, so I won’t be able to do a full analysis of today’s trade data.

US imports were higher in May than in April.  Non-oil imports rose by $2.5b; petroleum imports rose by $1.5b.   But y/y growth in non-oil imports is still pretty subdued – 5.6% in May.   I wouldn’t say non-oil imports are flat right now, but they aren’t growing that fast either.    

Oil, well, is likely to continue to be a drag.  The May import price was around $59.4 a barrel.   That could easily go up. 

Export growth picked up though – the q1 export slump doesn’t look to have been sustained in q2.     May export growth was a bit over 11% y/y, and the y/y  change in the three month moving average was only a bit less.    And later in the year, Boeing may even start exporting a few 787s along with its 777s and 737s.

The strong global economy is having an impact.  As is the weak dollar.   Too bad the yen and the RMB are even weaker – the yen because it has fallen in nominal terms, and the RMB because its rise against the dollar hasn’t been fast enough to offset China’s strong productivity growth.

If oil does not rise much further, if non-oil goods imports continue to grow at 5-6% y/y and if exports continue to rise by 10-12%, the US trade deficit should fall slowly over time.   (BWS Note: edited -- I initially left a "not" out)

US imports from China rose by 13.5% in May, and for the year-to-date, they are up 16.8%.   US imports from the rest of Asia are flat, so total imports from Asia are up 8.1% ytd.  That is more than the 5.4% increase in non-oil imports ytd.     Asia’s overall surplus is still rising relative to US GDP – and Asian producers are gaining market share relative to other suppliers.

Still, sales to the US haven’t driven China’s 2007 export boom.   Chinese exports to Europe are growing much faster – the RMB is really weak v the euro.   And China is selling a lot of goods to the world’s commodity exporters as well.  

I don’t have the data in front of me, but Russian imports rose by something like 40% in the first half of 2007.    The Gulf probably won’t be that far behind.  The oil exporting economies are among the big engines of global demand growth right now …  

p.s. I also have been working on something on China's q2 reserve growth, but encountered some computer-related difficulties and wasn't able to post it on the road.   Valuation gains likely explain around $5b of China's $130b in reserve growth, so $125b is real.    Stephen Green's forecast of $500b plus in Chinese reserve growth looks pretty good right about now. 

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