Exports reach highest level in two years The U.S. trade deficit dropped more than expected in July as exports reached their highest level in two years, official data showed Thursday, boosting hopes for the U.S. economic recovery. The trade deficit dropped to $42.8 billion in July, a 14% decline from the previous month’s revised figure of $49.8 billion – its highest level in 20 months, the Department of Commerce said.
The total July exports rose 1.8% to $153.3 billion from June to its highest level since August 2008 on the back of strong sales of aircraft, industrial machinery, computers and telecommunications equipment, it said. Imports fell 2.1% to $196.1 billion in July from the previous month. Read more here.
Canada imported more than it exported in 2009, the first time the country has posted an annual trade deficit since 1975. Statistics Canada reported Tuesday the country exported $369.7 billion worth of merchandise to the world in 2009, down 24.5% from 2008.
At the same time, imports fell 15.5% to $374.2 billion during the same period, giving Canada a trade deficit of $4.5 billion for the calendar year. That was the first annual trade deficit for Canada’s export-dependent economy since 1975, though the size of the former trade surplus has been on a downward trend since 2004. In 2008, Canada posted a $46.9 billion trade surplus.
The widespread slowdown of the global economy significantly affected the market for Canadian goods, especially in the first half of the year, the data agency said.
Canada maintained its trade surplus with the United States, though it narrowed to $34.8 billion in 2009 from $89.1 billion in 2008. The surplus to the United States alone hit its lowest level since 1997. The trade deficit with countries other than the United States narrowed to $39.3 billion in 2009 from $42.2 billion in 2008.
In 2009, the United States represented 63% of Canada’s total merchandise trade (exports and imports combined), down from 65.7% in 2008 and 71.1% in 2005.
For the first time, countries other than the United States accounted for a quarter of Canada’s exports, up from 16.2% in 2005. China replaced Japan as Canada’s third largest trading partner, behind the United States and the United Kingdom. Exports to China, which have been growing for the past seven years, increased 6.6% to $11.2 billion. Canada’s major exports to China include crops such as canola and commodities such as iron ore, coal and other fuel products. Canada imported $39.7 billion worth of merchandise from China, down seven percent from 2008.
The “new mix” is out to topple the “new normal” as the paradigm for America’s economic future.
The 5.9% annualized surge in fourth-quarter growth – the fastest since 2003 – was powered more by exports and business investment than the traditional drivers of consumption and housing. This new mix of demand will boost the economy by 3.7% in 2010 and pave the way for 3.5% annual average increases thereafter, said Joseph Carson, an economist at AllianceBernstein in New York, who coined the phrase.
His forecast contrasts with the 2% rate penciled in for later this year and the longer term by new-normal proponent Mohamed El-Erian, chief executive officer of Newport Beach, California-based Pacific Investment Management Co., who argues that growth will be depressed by consumer retrenchment and financial regulation. “What’s going to change is how we generate growth, not how fast we can grow,” Carson said in an interview. “That’s how I come up with a new mix rather than a new normal.” Read more here.
Cavernous trade deficits and high unemployment are an unhappy combination, for governments and for open trade. When unemployment rates are high, as they are now - around 10 percent in the United States, and higher in some parts of Europe - politicians wishing not to join the ranks of the jobless find it harder to argue that what domestic demand there is should support jobs elsewhere. Thus, when times are good, deep trade deficits - and their inevitable counterpart, large surpluses in other countries - tend to be the subject of largely ignored warnings about global imbalances. But during recessions, they become politically explosive.
During the early 1980s, trade tensions pitted the United States against Japan and Germany, both of which were running substantial trade surpluses with the US. Today, it is the US and China, a relatively new export powerhouse, that have come to epitomise global financial imbalances (though they are hardly the only countries with significant surpluses or deficits).
A country’s balance of trade depends on a wide range of factors, such as domestic savings and investment. But in times of crisis, countries with deficits seeking a quick fix for imbalances often single out exchange rates as the main culprit. Key surplus countries’ currencies are too weak, they argue, making their exports unfairly cheap and imports unduly expensive.
In the first half of the 1980s, Washington pushed for the revaluation of the yen and the deutsche mark. Today, it is the Chinese renminbi that stands accused of being artificially weak.
Part of the contention over China’s exchange rate arises from the fact that its currency has been effectively re-pegged to the dollar since July 2008, making it the only major economy without a floating exchange rate. Read more here.
Canada's current account deficit narrowed in the fourth quarter of 2009 as the country's surplus in goods trade with the United States expanded for the first time in six quarters, Statistics Canada said on Friday.
The current account gap shrank less than expected to C$9.77 billion ($9.22 billion) from C$13.80 billion in the previous quarter. It was the fifth straight deficit after a decade of surpluses and was bigger than market expectations of an C$8.50 billion shortfall due to widening deficits in services trade and investment income.
The current account results add to growing evidence of a gradual economic recovery in Canada and come as the government is under pressure to map out a strategy to pay down its record-large fiscal deficit.
Ahead of a meeting today [Wednesday] at the White House, Ron Bloom, President Barack Obama’s senior adviser for manufacturing policy, said that the U.S. needs, “legal, tax and regulatory regimes that promote American manufacturing and do not place an undue burden on those who wish to manufacture products in America. “It is vital to have a concerted effort across the administration to support an innovative, vibrant manufacturing sector that creates and sustains good paying jobs.” […]
In response to today’s announcement, U.S. Sen. Sherrod Brown (D-OH) issued the following statement:
“While the public and private sectors are creating a demand for new industries like wind, solar, high-speed rail, and medical IT, we need to do more to ensure that we make these products in America. The Obama Administration’s framework released today is a significant step for domestic manufacturing and a departure from years of neglect that previous administrations wrought on our nation’s manufacturing sector.
“The proposals outlined in the framework can help stem the loss of jobs and create new jobs for American workers by investing in 21st century technologies. But in order to provide manufacturers with the tools they need to create jobs, we need policies that do not just stimulate consumption -- we need to stimulate production…” Read more here.
It’s too soon to declare that the nascent economic recovery will last, Federal Reserve chairman Ben Bernanke warned Monday. “We still have some way to go before we can be assured that the recovery will be self-sustaining,” Bernanke said a speech to the Economic Club in Washington, D.C.
The Fed chief repeated his belief that the recovery will continue at least into next year. But he warned that “formidable headwinds” such as a weak job market, cautious consumers and still-tight credit threaten an American economy that grew at an annual rate of 2.8% in the third quarter of 2009. Those forces “seem likely to keep the pace of expansion moderate,” he said. Economists worry that the recovery in the world’s largest economy could fizzle in the latter part of 2010 as government stimulus fades.
The U.S. economy is closely watched in Canada because the latter’s economy is heavily dependent on a healthy American market for its natural resources, services or manufactured goods exports. Although Canada entered recession several months after the United States and its key financial services and real estate sectors have both held up comparatively well, both countries are dealing with high unemployment and added government spending calculated to soften the blow and restore consumer and business confidence. Read more here.
The U.S. needs to stimulate exports of machinery and other manufactured goods as part of a larger effort to regain factory jobs lost in this recession, says John Engler, president of the National Association of Manufacturers.
Calculations by the nation’s largest manufacturing trade group show the U.S. ranks last among the world’s 15 largest manufacturers in terms of “export intensity.” Rather than measuring raw export numbers, export intensity gauges the proportion of the nation’s manufacturing production that is exported.
Export powerhouses Germany and Taiwan top the list. But others, including Brazil, Turkey and Spain, also exceed the U.S. in terms of the proportion of their goods that are exported.
“If we could simply get exports up to the world average – which is a little more than two times where it is – we could eliminate the trade deficit,” says Mr. Engler. The NAM favors a variety of measures, including tax relief and other support for domestic production, such as greater federal support for export promotion. Read more here.
Canada recorded a $1.43-billion trade deficit with the rest of the world in July as imports rose faster than exports, Statistics Canada said Thursday. But analysts were quick to say the report is good news for the Canadian economy.
The agency said imports rose 8.3% from the previous month to $31.7 billion – mainly because of a 9.9% gain in imports from the U.S. Exports climbed 3.3% to $30.3 billion. July’s $1.43 billion trade deficit compares to a revised surplus of $37 million in June.
The agency said the gain in imports halted four straight months of decline and was the result of an 8.7% rise in volumes as prices slipped 0.4%. Shipments of machinery and equipment, automotive products and energy products were the main drivers of import growth. The growth in exports was attributable to a 5.9% increase in volumes. Prices fell 2.4%. Read more here.
Summary statistics and a link to the data files are on the Statistics Canada website at website. Export and import price indexes can be viewed here.
Related:
July Trade Deficit Climbs 16.3% to $32 Billion (The Associated Press)
The U.S. trade deficit shot up in July to the highest level in six months as a surge in shipments of foreign oil and autos pushed imports up by a record amount. The Commerce Department said Thursday that the trade deficit rose 16.3% to $32 billion in July, much larger than the $27.4 billion imbalance that economists had expected. It was the largest imbalance since January and the percentage increase was the biggest in more than a decade. Read more here.
Red Ink Swamps Harper (Toronto Star)
Ottawa’s finances are in much worse shape than previously forecast and the Conservatives no longer have any idea when they can balance the books.
Finance Minister Jim Flaherty yesterday warned Canadians of painful spending restraints to deal with up to 10 years of deficits. Read more here.
Its 451 parts are made in dozens of nations, and creating the little doodads employs thousands of foreigners. Final assembly is done in China-a country that right-wingers and left-wingers alike fear is an economic threat to the U.S.
As the recession worsens, maybe patriotic Americans should be smashing foreign-made iPods in protest. Or at least hiring bikini-clad American women to do the job, which is exactly what Reason.tv did. Our patriotic, sledgehammer-wielding bikini bandits headed to California’s Venice Beach to smash some foreign-made iPods to make a political statement about saving American jobs.
Maybe the United Steelworkers Union (USW), one of the biggest “Buy American” backers would like to hire these patriotic ladies for their next rally.
“Every other nation during this economic downturn is directing their stimulus money inward,” thunders USW’s Billy Thompson at a rally in West Virginia. “Now if they can do it, why in the hell can’t we?”
Actually, we are. President Obama’s $800 billion stimulus package came equipped with a “Buy American” provision, and more than 500 state and local governments have signed “buy American” resolutions. And that may be just the beginning of the protectionist push.
Reason.tv went to a Washington, D.C. event where business owners and activists learned how to lobby for more protectionist laws. “If you want to sell it here, build it here,” says one participant who referrs to those who ignore the “buy American” imperative as “uneducated, ignorant people.”
And shouldn’t we be patriotic purchasers? That’s what car ads, draped with Old Glory and heartland visuals, suggest. What could be more patriotic than buying a Jeep Patriot? With American automakers hurting so badly, that’s got to help America.
“That’s nonsense,” says George Mason University economist-and Cafe Hayek blogger-Donald Boudreaux.
“The Jeep Patriot, despite it’s name is actually less American than some Toyota products. It’s literally impossible-at least in any practical sense-to buy American.’”
Boudreaux argues that Americans should buy whatever products they choose; neither guilt nor laws should push them to buy American. “The thing that is most distinctively American is freedom. To insist that Americans should not be free to buy good from foreigners that’s very anti-American.”
And what about your iPod?
Even though plenty of foreigners have jobs thanks to it, so do 14,000 Americans whose duties include designing and marketing the little buggers. So the iPod is a product of America and the world, and these days that describes nearly all the items we buy.
Welcome to the iPod economy, where just about everything is made everywhere.
After hearing the whole story, Reason.tv’s bikini bandits decided to put down their protectionist sledgehammers. Will America’s people, pundits, and politicians follow suit?
On June 9, 2009, Canada’s most senior diplomats in the U.S. met with over 75 members of Congress and staff to drive home the message that the Buy American restrictions in the U.S. Recovery Act are costing jobs on both sides of the border. The Canadian delegation was accompanied by close to 30 American business leaders who support the message that by working together our two countries can kick-start the North American economy.
Americans still believe that manufacturing remains the backbone of the economy says new Deloitte study
A new annual index released earlier this week by Deloitte LLP and The Manufacturing Institute shows that Americans view manufacturing as the most important industry for a strong national economy. There is a wide perception gap, however, between the public’s highly positive views of manufacturing’s contributions to America’s economic success and their negative views about pursuing a career in manufacturing.
The survey, Public Viewpoint on Manufacturing (PDF), which assessed public perceptions and understanding of a wide range of issues related to manufacturing, shows that the majority of respondents (71%) view manufacturing as a national priority with 59% agreeing that the U.S. manufacturing industry effectively competes on a global scale. These results fall in line with public perceptions that manufacturing plays a larger role in overall economic prosperity compared to the technology, energy, health care, retail, communications and financial services industries.
“The public’s ranking of manufacturing as the top industry of importance to our economy, as well as its belief that U.S. manufacturers can compete globally, is very telling,” said Craig Giffi, Deloitte LLP vice chairman and U.S. Consumer & Industrial Products industry leader. “Americans clearly still believe that manufacturing remains the backbone of the economy.” Read more here.
