US Trade Deficit Hits 18-Month Low

The combination of falling oil prices and increased exports has the US trade deficit at its lowest point since December 2010.

The combination of falling oil prices and increased exports has the US trade deficit at its lowest point since December 2010.

The Hill (“US trade deficit hits 18-month low“):

The U.S. trade deficit in June hit its lowest level since December 2010, the Commerce Department said Thursday, as the gap between the nation’s exports and its imports from abroad narrowed to $42.9 billion.

The numbers are good news for the Obama administration, which has come under attack from Mitt Romney for being “soft” on China, the main driver of the U.S. trade deficit. The Republican presidential candidate has vowed to designate China a currency manipulator on his first day in office.

The trend was fueled by a record high in exports, which reached $185 billion thanks to spikes in sales of consumer goods, automobiles and and industrial supplies and material. U.S. sales of food and beverages abroad were down by $800 million, however.

Imports of goods and services fell to $227.9 billion, down from $231.4 billion in May, driven in large part by falling oil prices.

This is one of those “good news” reports that may or may not actually be good news.

That oil prices are down is largely a good thing, of course, for those of us who buy rather than sell oil. The only negative is that it reduces the incentive to “end our dependence on foreign oil,” a bipartisan platitude for some four decades that’s mostly observed in the breach.

Similarly, it’s probably a good thing that we’re selling more stuff overseas. The caveat is that export demand fluctuates wildly based on currency values and the price of goods. Over the past year, the dollar is up over the euro and the British pound but down against the Chinese yuan. I have no insights, alas, as to what’s driven the increased attractiveness of our consumer goods, automobiles, or industrial supplies.

UPDATE: Commenter Ben Wolf points to this handy U.S. International Trade in Goods and Services Highlights report out today from the Census Bureau:

Goods and Services

  • Exports increased to $185.0 billion in June from $183.3 billion in May (revised). Goods were $132.8 billion in June, up from $130.9 in May.  Services were $52.2 billion in June, down from $52.4 billion in May.
  • Imports decreased to $227.9 billion in June from $231.4 billion in May (revised).  Goods were $190.3 billion in June, down from $193.9 billion in May. Services were $37.6 billion in June, up from $37.5 billion in May.
  • For goods, the deficit was $57.5 billion in June, down from $62.9 billion in May. For services, the surplus was $14.6 billion in June, down from $14.9 billion in May.

Goods by Category (Census basis)

  • The May to June increase in exports of goods reflected increases in consumer goods ($0.9 billion); automotive vehicles, parts, and engines ($0.7 billion); industrial supplies and materials ($0.6 billion); other goods ($0.2 billion); and capital goods ($0.2 billion). A decrease occurred in foods, feeds, and beverages ($0.8 billion).
  • The May to June decrease in imports of goods reflected decreases in industrial supplies and materials ($2.3 billion); capital goods ($1.3 billion); consumer goods ($0.6 billion);and foods, feeds, and beverages ($0.2 billion).  Increases occurred in automotive vehicles, parts, and engines ($0.6 billion) and other goods ($0.1 billion).

Services by Category

  • Exports of services decreased $0.2 billion from May to June.  The decrease was mostly accounted for by decreases in other private services ($0.1 billion), which includes items such as business, professional, and technical services, insurance services, and financial services, and other transportation ($0.1 billion), which includes freight and port services.  Changes in the other categories of services exports were small.
  • Imports of services increased $0.1 billion from May to June.  The increase was more than accounted for by increases in passenger fares ($0.1 billion) and other private services ($0.1 billion).  Changes in the other categories of services imports were small.

Goods by Geographic Area (Not Seasonally Adjusted)

  • The goods deficit with Japan decreased from $6.4 billion in May to $6.0 billion in June.  Exports increased $0.3 billion (primarily civilian aircraft, engines, equipment, and parts; metallurgical grade coal; and telecommunications equipment) to $6.0 billion, while imports decreased $0.2 billion (primarily pharmaceutical preparations and organic chemicals) to $11.9 billion.
    • The goods deficit with China increased from $26.0 billion in May to $27.4 billion in June.  Exports decreased $0.4 billion (primarily copper, raw cotton, and organic chemicals) to $8.5 billion, while imports increased $1.0 billion (primarily computers, apparel, and cell phones and other household goods) to $35.9 billion.

 

  • The goods deficit with the European Union decreased from $10.5 billion in May to $8.4 billion in June.  Exports increased $0.4 billion (primarily pharmaceutical preparations and fuel oil) to $23.3 billion, while imports decreased $1.7 billion (primarily passenger cars and pharmaceutical preparations) to $31.7 billion.

Correction: The original version of this post had the streak at 20 months, counting from December 2010 to present. The data end in June.

FILED UNDER: Economics and Business, Quick Takes
James Joyner
About James Joyner
James Joyner is Professor and Department Head of Security Studies at Marine Corps University's Command and Staff College and a nonresident senior fellow at the Scowcroft Center for Strategy and Security at the Atlantic Council. He's a former Army officer and Desert Storm vet. Views expressed here are his own. Follow James on Twitter @DrJJoyner.

Comments

  1. Rob in CT says:

    The real problem, as you point out, is that if/when the economy picks up this will too. It’s a real problem, and has been for years. And neither party knows what to do about it, as far as I can tell.

  2. Boyd says:

    Waitasecond…June 2012 isn’t 18 months after December 2010? I guess my calendar is defective.

  3. James Joyner says:

    @Boyd: Ah. I somehow missed that the data are from June; I was counting through today.

  4. Boyd says:

    @James Joyner: No worries. My editing services are free of charge.

  5. Ben Wolf says:

    @James Joyner

    Exports are up only slightly since May. Most of the drop in our deficit is due to fewer imports; we aren’t buying as much abroad.

  6. Ben Wolf says:

    Here’s a relatively useful chart. You can see that our trade deficit is trending up until May, where there’s an unusual drop in imports.

    http://www.census.gov/indicator/www/ustrade.html

  7. rjs says:

    “This is one of those “good news” reports that may or may not actually be good news.” is sure an odd thing to say…this could mean a major upward revision to GDP

  8. Dave Schuler says:

    The iPhone 5 release date is expected something within the next several months. That alone is likely to increase our adverse balance of trade with China.

  9. al-Ameda says:

    Romney, to campaign advisor: “Get out a release immediately. This is a result of the job creation activities we were responsible for at Bain.”

    Advisor: “So, the companies that you forced to outsource operations and jobs to China are now purchasing American goods?”

    Romney: “Yes …no … wit a minute … yes!”

  10. Pete Murphy says:

    Good analysis. June’s trade deficit figure is just an upward blip in a very downward trend. Read http://petemurphy.wordpress.com/2012/08/09/u-s-manufactured-exports-rebound-in-june/.