Today’s data release contained a bit of fresh air (in contrast to DC’s unseasonably hot air – and that’s not metaphorically speaking – we’re talking code orange, 90+ degrees with comparable humidity, and iffy air quality); imports fell, despite an increase in oil prices. The amount of oil we imported dropped by an unusually large amount, and our imports from Japan dropped as well. On the other side, exports edged up, recording the second consecutive month of record exports following a surge last month. Subsequently, the trade deficit contracted, so April’s report was overall pretty good. Next month, though, we could see some unwinding on the oil and Japan fronts.
Let’s talk first about exports – specifically, the 16.7% growth we have seen over the first four months of this year compared to the same period last year. Not too shabby. Drilling down, as we posted last month [1], exports have expanded in a number of industries accompanied by solid employment gains in the manufacturing sector. This has been particularly evident in durable goods.
The biggest surprise in the data this month, as mentioned above, was oil imports. We expected the dollar amount of our oil imports to rise because prices for oil went up (by about $9 a barrel in fact), and we expected the amount of oil we import to stay fairly consistent (as we have discussed many times before, our country’s appetite for foreign oil is not very sensitive to price: even when prices go up, purchases remain fairly constant). But the amount of oil we imported in April declined substantially from March. On a non-seasonally adjusted basis, the daily average number of barrels of crude oil we imported fell by 11.7%. Although the decline in oil imports is welcome, it’s unlikely that America has suddenly become more nimble in its oil consumption, so I wouldn’t be surprised if the amount of oil we import returns to more recent levels in May.
On that front, petroleum still accounts for a very large fraction of our overall trade deficit. Quick quiz: For the first four months of the year, what fraction of our trade deficit was due to oil?
A. 36.7%
B. 48.3%
C. 58.7%
D. 65.5%
The correct answer is C – 58.7%. Check out the pretty graph below. Although oil imports fell in April, oil still made up a majority of our April deficit (59.7% in fact).
The last note on today’s data relates to Japan. The recent tsunami and subsequent nuclear reactor-related issues quite likely played a considerable role in reducing our imports from Japan. Using our own rough seasonal adjustment calculation, it looks like our imports from Japan fell by more than $2 billion in April, a bit higher than 20%. The decline was particularly noticeable in motor vehicles and parts.
Overall, the April trade was underscored by record exports – in both goods and services, including U.S. industrial supplies and capital goods, and the data so far this year are exceeding the goals of the National Export Initiative.
~Mark Doms, Chief Economist, U.S. Department of Commerce
June 9, 2011
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