Although at first glance the top-line numbers from today’s data release on international trade [1] don’t look all that encouraging, the overall picture (think of a painting) for international trade remains essentially unchanged. The main elements in that overall picture include a large bright spot for exports (representing good) and a large, black, growing pool of oil (representing evil) on the import side. Since the Department of Commerce leads the President’s National Export Initiative, I’d like to talk about exports first. Exports dipped a little in May, but exports have been growing at a strong pace overall this year. In fact, I have been pleasantly surprised at how fast they’ve been growing, so a single month where growth pauses to catch its breath is hardly surprising and hardly cause for alarm. Looking at the details, there were no whacky stories within the month-to-month change, and in the first five months of this year, exports are still up more than 16.4 percent compared to the same period last year. This increase is broad based, covering a wide range of exports to a variety of foreign markets. Export growth has been an important jobs engine since the end of the recession, and that is likely to continue (see this report [2]).
Our exports of goods (as opposed to services) grew 19.0 percent in the first five months of 2011 compared to the same period last year – nearly as large of an increase as during the first five months of 2010 (22.2 percent). Although export growth so far in 2011 is similar to that of 2010, there have been significant changes in our export markets that are contributing to that growth (see the pretty, multi-color chart below). For example, export growth to Europe (the blue dots) and the Middle East (the purple dots) has picked up considerably (their data points tend to lie above the 45-degree line; if the growth rates had been the same during the two periods, the dots would be on the 45-degree line, while slower growth would put the dots below the 45-degree line). By contrast, export growth to our NAFTA partners (Canada and Mexico, our two largest export markets) and most of Asia (the yellow dots) has slowed. But it is important to note that, although exports to most Asian countries have decelerated some this year, export growth to most Asian countries still grew at double-digit rates.
Why the shift? U.S. exports tend to respond to GDP growth in the rest of the world, and GDP growth in Europe has picked up from mid-2010 to early 2011. While recent GDP growth in Asia is still strong, it has decelerated somewhat from the high rates seen early in the recovery. Export growth and GDP growth in Latin America is mixed, with growth decelerating in Brazil but picking up in Chile and Argentina.
Chart notes: Export growth in the first five months of 2011 from a year earlier (vertical axis) is compared to growth in the first five months of 2010 from a year earlier (horizontal axis). Countries falling to the left of the 45 degree line grew faster from mid-2010 to early 2011 than from mid-2009 to early 2010. The sizes of the dots are proportional to the volume of exports from January through May of 2011.
Now onto imports. The import story for May is basically the flip side of the import story for April. If you think back to the last barbecue you went to over the past several weeks, no doubt you talked about how our oil imports took a freakish dive in April (I don’t understand why I don’t get invited to more barbecues). Well, oil imports returned to normal levels in May (in quantity of barrels imported) and prices went up. Therefore, how much we spent on foreign oil shot up by billions of dollars, with oil accounting for ¾ of the increase in imports in May. That’s not good, but it’s a little better than I expected. Elsewhere on the import side, increases were widespread and generally small. Our economy is growing, and when that happens, we import more stuff, so not much to look at here folks, let’s move forward.
Another item of note is our trade with Japan. April showed a $3 billion decline in imports from Japan, largely as a result of the tragic tsunami and related nuclear radiation issues (see what we wrote yesterday on this subject [3]). The import data for May show no improvement here; in fact, imports from Japan went down again, indicating that the portion of Japan’s economy that produces goods for export to the U.S. may not yet have recovered in May.
So overall, the picture presented in today’s foreign trade release isn’t as bad as it may seem, with exports remaining strong, which means good-paying jobs here in the U.S.
~Mark Doms, Chief Economist, U.S. Department of Commerce
July 12th, 2011
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