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The Atlanta Fed's macroblog provides commentary and analysis on economic topics including monetary policy, macroeconomic developments, inflation, labor economics, and financial issues.

Authors for macroblog are Dave Altig, John Robertson, and other Atlanta Fed economists and researchers.


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June 10, 2005


The Trade Report: What The Experts Say

As you undoubtedly know by now, the U.S. trade deficit checked in less than expected for the second month in a row -- and that first one (March) was even less than initially reported.  From Bloomberg:

The U.S. trade deficit widened less than expected to $57 billion in April as record imports signaled healthy consumer demand and unprecedented exports provided good news on manufacturing.       

The trade gap in goods and services followed a $53.6 billion deficit in March that was narrower than the government first reported, the Commerce Department today said in Washington. Imports rose 4.1 percent, the biggest increase since November 2002, as Americans paid record prices for oil and bought more Chinese textiles. Exports rose 2.9 percent, the most this year.         

A trend?  Some think so -- sort of.

"The huge U.S. trade deficit may finally be stabilizing,'' said Peter Kretzmer, a senior economist at Banc of America Securities Inc. in New York...

"We saw decent exports here. The weak dollar is beginning to have its effect,'' said Joel Naroff, president of Naroff Economic Advisors in Holland, Pennsylvania, in an interview. ``I think that will continue to happen, although I really don't expect the trade deficit to narrow until the end of this year if at all.''

A similar sentiment could be found at MarketWatch:

"For now, the trade gap is moving sideways," said Robert Brusca, chief economist at FAO Economics.

The writers of the Associated Press report decided on a slightly different emphasis.  Via Forbes:

Trade Deficit Swells As Oil Imports Climb

The U.S. trade deficit rose... as a big jump in exports was swamped by record foreign oil prices and heavy American demand for imports...

The April deficit, which was the fourth largest on record, was up a sharp 6.3 percent from a revised trade gap of $53.56 billion in March, which had been an improvement from February's record $60.12 billion deficit.

Whether looking at glass half full or exhibiting some steely-eyed realism with respect to the trade situation, the AP report did include this assessment about what it means for the state of the U.S. economy:

"This data suggest that the economy bounced back strongly from the soft patch of March," [said Nariman Behravesh, chief economist at Global Insight].

Mr. Behravesh gets around.  From the aforementioned Bloomberg article:

"The economy is on a somewhat stronger growth trajectory,'' said Nariman Behravesh, chief economist at Global Insight Inc. in Lexington, Massachusetts. He said the economy may grow at about a 3.5 percent annual rate this quarter compared with his previous estimate of 3.1 percent.

He's not alone, though:

"This report supports Greenspan's rosy economic view that the economy is likely to continue to grow unabated this quarter thereby justifying continued increases in short-term rates,'' said Anthony Chan, a senior economist at JPMorgan Asset Management in Columbus, Ohio, who accurately predicted the gap.

And from Reuters:

"The trade numbers are a little more moderate. The rate of deterioration is slowing. That's good news for the economy. It's being less of a drag," said Dana Johnson, chief economist with

And at the Financial Times, the ubiquitous Behravesh opines yet again...

Nariman Behravesh... said the trade figures provided further support for the Fed's sanguine view of economic prospects. “Oil played a role in boosting imports but domestic demand growth was quite strong in April...”.

... joined by:

Kathleen Stephansen, director of global economics at CSFB in New York, said: “The manufacturing sector has largely shifted from the US to Asia. While Asian economies are pursuing export-led growth, it is inevitable we will see large trade imbalances with the US.” High oil prices have boosted the trade deficit in recent months, meaning that the trade figures looked better in inflation-adjusted terms.

At the Wall Street Journal, a perspective that spanned both short-term optimism with longer-term concern:

Economist Steven Wood of consulting firm Insight Economics wrote in a note that the April trade gap was narrower than its first-quarter average and could be a positive for growth in the current quarter. But he also warned that "because imports are so much larger than exports, a structural trade deficit has emerged that will be extremely difficult to narrow on a consistent basis."

Good point, and that seems to be the general consensus.  I know because this appeared in the Reuters link noted above:

Nariman Behravesh [said]... "we  continue to expect the trade deficit to keep getting worse."

UPDATE: You'll find more at Skeptical Spectator.

June 10, 2005 in Trade Deficit | Permalink

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