More oil, less stuff: The US January trade data
The Fed’s dramatic policy announcement has justifiably overshadowed the January trade data, which didn’t tell us much that we didn’t already know. Suffice to say that the rise in the overall deficit reflects a rise in the US imported oil bill.
Seasonally adjusted oil imports were $39.5b in January, up from $24.84b last January. The average price of imported oil was $84.09. If the net oil import bill (seasonally adjusted) averages $35b a month — its January level — the net petroleum balance would deteriorate by $125-30b. That though may be a bit too optimistic given recent moves in the oil market. Any way you cut it, oil will be a big drag — and likely keep the overall trade deficit up.
Non-oil imports though are falling, in both nominal and real terms. January non-petroleum goods imports were around $133b, down from $136-137b in q3, and $138b as recently as November. Real imports are also falling.
Nominal exports are still rising, but real exports seem to have mostly stalled. The following graph — prepared with help from Arpana Pandey — shows real goods exports and real goods imports (from the BEA data) since 2004.
The rise in dollar terms reflects higher agricultural prices and the like. Ag exports are up 43% in nominal terms — paced by a doubling of soybean exports and big increases in corn and wheat exports.
The bilateral data for China is also interesting. Overall non-oil imports (seasonally adjusted) are up 2.5% y/y — but consumer good imports are essentially flat.
Perhaps not surprisingly, US imports from China (non-seasonally adjusted) are also flat. January imports were only up 2.1% y/y. That is below December’s 6.5% — and well below the overall rate of growth in China’s exports. US imports from China continue to grow just a bit faster than US imports from the rest of Asia — which were up 0.5% y/y in January — but the gap is shrinking.
US exports to China by contrast continue to grow. And — surprise of all surprise — the bilateral deficit with China is now coming down. The January 2008 deficit ($20.3b) was smaller than the January 2007 deficit ($21.3b). The overall deficit with the Pacific Rim is also falling ($29.65b in 08 v $31.6b in 09).
Interestingly enough, US imports from Europe are now growing at a faster pace (4.7%) than US imports from China. A J curve effect? Or imports of refined petroleum from Europe? The overall US deficit with Europe is falling, but not quite as fast as it was a while back.
The US slowdown in the main reason why the US deficit with China is now falling. And the divergence between China’s shrinking surplus with the US and its rising surplus with Europe no doubt reflects the fact that Europe is growing faster than the US. But I also suspect that the fact that the RMB is now rising in a significant way against the dollar while still sliding against the euro may have something to do with the difference.
Then again I have long thought that exchange rate changes matter, unlike some.
No Responses to “More oil, less stuff: The US January trade data”
DC • March 11th, 2008 at 1:41 pm
So Brad, how do you explain that German’s trade surplus increases even with a higher Euro. Perhaps it’s because the Germans build high value added and quality products. Of course, exchange rates do matter some, but it isn’t the major issue. With Honda Accords and Toyota Camrys built in the US with a higher domestic content than the made-in-Mexico Ford Fusion, why is Toyota’s market capitalization larger than GM, Ford, and Chrysler combined. US Economists thinking dollar devaluation and wage regression are on the wrong track. Does the US really want to globally compete with Vietnam and Cambodia on the basis of “cheap labor intensive” industrial production? – DC
http://www.rte.ie/business/2008/0310/germany.html
Germany posted a strong trade surplus in January despite the rising euro, as global demand underpinned the biggest European economy.
The surplus of €17.1 billion was much better than expected, with economists forecasting the January figure would come in around €15 billion.
In December, the German trade balance had recorded a surplus of €10.7 billion.
Despite the euro climbing toward record highs, German exports increased by 3.8% on a monthly basis to €84.4 billion, while imports grew by 4.2% to €67.3 billion.
RebelEconomist • March 11th, 2008 at 1:46 pm
This is off-topic, but your initial sentence surprised me. The market seems to be making too much of today’s Fed policy announcement. Various headlines give the impression that the Fed are adding $200bn of base money. That is not the case, because any dealer financing their inventory of, say, MBS has to borrow a similar amount of treasuries from the Fed. Essentially, the operation is partly a collateral switch and partly a lengthening of the period for which the Fed will lend treasuries.
Guest • March 11th, 2008 at 1:47 pm
Not a single dissenting voice on Bloom, cnbc, fbn. Everyone agrees this is a wonderful move. The Socialist Dream is here. Your Socialist Dreams have been fulfilled. Free govt money for private American banks. Banks run by the proverbial “stupid american”. 100 billion, 200 billion…make it a trillion. Debase the currency. “Inject” “liquidity” -terms that cannot even be defined. Credit “crunch”- can’t even be defined. The “financiers” just invent their own language to fool the public. American financiers have a worhless product and no buyers..except the stupid american taxpayer! Pay up americans! Bailout your banker slavemaster. And pay it directly to your government slavemaster!
satish • March 11th, 2008 at 2:13 pm
DC-there is lot of regional trade within euro region. Trade surplus in germany can be bigger deficit for spain, UK, italy, France etc. It would be interesting if overall euro region have increasing trade deficit. Europe will not be affected much by US slowdown in terms of goods. Since Europe is financially tied to US, service trade within europe could come down substantially and overall credit slowdown.
Generally speaking there is so much discussion about US-W.europe-east asian axis that rest of world seems to largely forgotten. there is another 4 billion people out of this axis and their role is increasingly visible. Latin america, FSU and eastern europe, africa and rest of asia are also flourishing and more prominent.
bsetser • March 11th, 2008 at 2:41 pm
Germany has also benefited from a capex boom in the emerging economies, and strong exports to places like russia. it makes a lot of high end capital goods.
HZ • March 11th, 2008 at 3:30 pm
RE,
It is not base money supply at issue. Market fear was driving up GSE spread and all kinds of leveraged players were facing liquidation. Now prime dealers could buy GSE at a discount (if there is one) and pledge to the Fed in exchange for Treasuries. This will reliquefy GSE market. It is a smart move. GSE are semi-Fed credit any way. Freezing up the GSE market at this time would be disastrous.
Claus • March 11th, 2008 at 3:46 pm
Hi Brad,
Thanks for keeping us up to date even as the Fed scurries around with their breathtaking initiatives. I will cut right to the main point. I do think that DC is right to point to Germany and thus Europe in all of this. The way I see it, the decoupling debate has always been about two interconnected issues.
1) Can the global economy continue to grow even as the US slows?
2) Will importers turn into exporters and vice versa?
These two questions are of course interrelated but in a European context we need to note one very crucuial point. EU27 is indeed in a deficit but the Eurozone is still in surplus mainly driven by Germany of course. And as we know the difference between EU13 and EU27 is the UK and, ever so importantly, Eastern Europe (to which in this case we can add Russia in the context of Germany’s trade balance). Now, Germany’s trade data for 2007 can be found here …
If we look at this data we see first of all the intra-european trade is by far the strongest driver of Germany’s surplus and especially the growth in Eastern Europe is important (US is too of course, overall number 2 destination). China and the rest of Asia are virtual piqsqueaks compared to other markets for Germany. So what is my point here? Well exchange rates do indeed matter and what we are seeing now is a testament to this, no doubt! However, I am merely skeptical that this process can continue. Basically, the countries in Europe (i.e. EU27) who have traditionally imported the most are now all slowing across the board and policy makers are busy trying to revert to export driven growth. So, I just don’t see how Europe can continue to muster all these hopes of rebalancing. Meanwhile, China is struggling and I am very concerned that what we are seeing now in China is a road towards runaway inflation and overheating. I mean, China simply cannot be expected to just turn around its growth path over the course of one US recession. The current system has just been allowed to engrain itself for too long.
In the end, the data do not lie of course and I am perfectly well aware of this. I, myself, am watching closely. However, I still cannot see how this process of rebalancing can go on and ultimately this is also why I don’t believe in the de-coupling idea, at least not the way it appears to be moving at the moment. Having said that we are seeing other interesting things too. Notable examples here would be India, Turkey, and Brazil who are all ‘beginning’ to feel the heat of rebalancing. They too of course will face tremendous challenges.
Ok, I guess we just need to watch now. We are definitely entering a new period of the whole BWII edifice. I don’t doubt that for a minute and Europe may even have the power to surprise (we all want that I guess) but I am still keeping my demography matters card on the table.
Claus
AC • March 12th, 2008 at 4:42 am
Brad — The Chinese customs statistics says that Chinese export to the USA was 20 billion dollar in last December and 19.2 billion in January, that is it went down. The USA statistics, as you said, shows that the US imported more from China in January than in last December? What can be the reason of the disagreement? I know that the numbers themselfs are usually rather different, but at least the trend should be the same.
DC — German export: In 2007 the eurozone had a trade surplus of 28.3 billion euros, the EU-27 had a deficit of 185.7 billion euros, and Germany had a surplus of 198.7 billion euros. These numbers show that as far as the economy is concerned, Germany is probably the only healthy nation within the EU right now, and a large part of its export goes to the other member states, and especially to the new member states. That is what keeps Germany end the EU going. The bad news is that this export to the new members leads to huge current account deficits, especially in the Baltic states, Romania and Bulgaria (but the UK also has a big trade and current account deficit). For example, Latvia runs a current account deficit, which is 20% of its GDP, Romania 10% etc. These high levels are insane, and cannot be kept up for long.
Claus — The Chinese inflation so far is mostly food-inflation, fortunately it has not yet spread to other areas. And the growth of personal income was around 10% last year, and double digit in all the past five years. Much higher than inflation.
RebelEconomist • March 12th, 2008 at 4:57 am
I continue to be surprised at the market reaction to what is I regard as a fairly minor policy change, but then I am not seeing haircuts on agency paper! A couple of posts ago, Brad called for central banks to BUY agency paper to stabilise the market. I am not sure whether China and Japan lend their treasuries, but if they do not, they have far more capacity for this kind of action than the Fed (ie lending treasuries and BORROWING agency collateral). And they would make a lot of money out of it, without increasing their unsecured exposure to either the agencies or the banks.
bayesian • March 12th, 2008 at 7:14 am
Suppose that China, Japan and other creditor nations were to impose an IMF-type structural adjustment program on the US as a condition for further lending or other intervention to stabilize the US financial system, what would such a program look like?
My suggestions for a US structural adjustment program would include balancing the budget (reverse tax cuts, introduce VAT, cut military spending), cutting carbon emissions (nuclear fission instead of coal, electrified rail instead of road transport), and controlling health care costs (Canada’s single-payer system). As the US political system is no longer capable of making policy changes required to deal with reality, maybe the best chance is for these policies to be imposed from outside.
RebelEconomist • March 12th, 2008 at 7:33 am
Re bayesian’s last sentence:
Rejoin the British Empire, America; All is forgiven!
Guest • March 12th, 2008 at 8:09 am
RebelEconomist
Can’t you stay on topic?
bsetser • March 12th, 2008 at 9:31 am
Clever off topic one-liners are allowed; long off topic digressions not-so-much …
AC — The US data counts Chinese goods shipped through Hong Kong as Chinese exporters, the Chinese data counts those goods as exports to HK. there is a similar distortion on the US export side — some goods sold to HK are likely onsold to China without registering in the US data as exports to China.
Guest • March 12th, 2008 at 10:31 am
Jim Rogers: ‘Abolish the Fed’
By CNBC.com | 12 Mar 2008 | 05:38 AM ET
http://www.cnbc.com/id/23588079
Federal Reserve Chairman Ben Bernanke should resign and the Fed should be abolished as a way to boost the falling dollar and speed up the recovery of the U.S. economy, investor Jim Rogers, CEO of Rogers Holdings, told CNBC Europe Wednesday.
Asked what he would do if he were in Bernanke’s shoes, Rogers, who slammed the Fed for pouring liquidity in the system and accepting mortgage-backed securities as guarantees, said: “I would abolish the Federal Reserve and I would resign.”
If this happened, “we don’t have anybody printing money, we don’t have inflation in the land, we don’t have a collapsing U.S. dollar,” he told “Squawk Box Europe.”
The Federal Reserve announced on Wednesday a rescue package that it would put around $200 billion into banks and investment houses and allow them to put up risky home-loan packages as collateral.
Wall Street responded to the news with the biggest rally of the year, but Rogers reminisced of the 1970s, when the Fed printed money to avert a recession, boosting inflation and then forcing interest rates to more than 20 percent to keep a lid on price rises.
“No country in the world has ever succeeded by debasing its currency,” he said. “That’s what this man is trying to do. He’s trying to debase the currency as a way to revive America. It has never worked in the long term or the medium term.”
Guest • March 12th, 2008 at 1:06 pm
Is Europe a big exporter of refined petroleum products to the US? I know they use a lot of diesel. I recall reading that they are exporting gasoline to the US. Perhaps the explains part of the discrepency in the data from Europe?
Guest • March 12th, 2008 at 2:07 pm
Jim Rogers said ‘Debasing the currency has never worked in the long term or the medium term’. Yeah? It might just work in the short term…until November, when it all becomes someone elses problem.
satish • March 12th, 2008 at 8:30 pm
Korean won has depreciated against dollar by 4% since start of january.
bsetser • March 12th, 2008 at 11:23 pm
BFB — I think the rupee has sold off recently in line with indian equities. my sense is that that RBI intervenes to limit appreciation, but hasn’t intervened to fight depreciation. i need to confirm that tho. certainly spot intervention was more limited in February.
also, i place a high premium on civil discourse and took down your post b/c of the sign off. pick one that doesn’t combine a proper name and a four letter word. thanks.
Guest • March 21st, 2008 at 12:43 pm
Germany’s exports outside euro area and Eastern Europe (including Russia) have not increased lately and are likely to be hit if Eastern Europe slows down. outside Russia the rest of these countries have quite shaky premises ( real estate bubbles, large trade imbalances, a lot of speculative capital that can leave at the first sign of troble and, lastly but not leastly, suboptimal demographics). with the demand from East Europe crumbling and if the euro stays high the Teutonic export machine may have a hard time keeping these exports up. this is probably the main threat to the German economy. Not surprinsing a lot of German giants are looking to expand their production capacities in North America.
as far as US economy goes after years of credit driven over-consumption, huge trade deficits and a costly, poorly chosen war it may be in for a lot of pain. add to this an increasing protectionist/anti-globalisation and anti-corporate popular mood ( and irrespective of who will win the elections this will be a huge political pressure) and the next couple of years will be quite a bumpy road.
Hoosier • March 21st, 2008 at 12:44 pm
Germany’s exports outside euro area and Eastern Europe (including Russia) have not increased lately and are likely to be hit if Eastern Europe slows down. outside Russia the rest of these countries have quite shaky premises ( real estate bubbles, large trade imbalances, a lot of speculative capital that can leave at the first sign of troble and, lastly but not leastly, suboptimal demographics). with the demand from East Europe crumbling and if the euro stays high the Teutonic export machine may have a hard time keeping these exports up. this is probably the main threat to the German economy. Not surprinsing a lot of German giants are looking to expand their production capacities in North America.
as far as US economy goes after years of credit driven over-consumption, huge trade deficits and a costly, poorly chosen war it may be in for a lot of pain. add to this an increasing protectionist/anti-globalisation and anti-corporate popular mood ( and irrespective of who will win the elections this will be a huge political pressure) and the next couple of years will be quite a bumpy road.
