Supply Chain Managers May Become Concerned About “Slumping” Goods Prices

The trade gap drifts lower as both imports and exports creep higher

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The August foreign trade report issued by IHS Global Insight US Economists, is being described as “rather bland.”

Exports crept 0.2% higher while imports nudged up by 0.1%. The monthly differences versus July were counted in the millions rather than the billions because of the small movements. Indeed, the revision to the July report of a $0.2 billion narrower shortfall matched the $0.2 billion August improvement.

Goods exports were unchanged in dollar terms and up 1.0% in constant 2009 dollars. Goods imports rose 0.1% in today’s dollars and climbed 0.8% in constant dollars. The percentage point gap on the export side and the 0.7% gap on the import side of the ledger indicates that prices cooled both for goods coming in and goods going out. There is more of a story in that dimension than the US trade picture.

“The goods side of the global economy is weak almost everywhere in the world outside of North America,” said IHS Global Insight US Economist, Patrick Newport. “Among sizeable manufacturing nations, the US and Canada stand alone in showing decent gains in the recent manufacturing surveys.

Meanwhile, Europe and Asia are “bordering on stagnation” and the smaller manufacturing economies are struggling between stagnation and moderate declines,” he added.

“This environment leaves prices slumping with weak global demand providing little or no cover for anyone trying to raise prices. This environment is likely to persist for the balance of 2014 and will receive more downward pressure from the US manufacturing sector cooling down from recent inventory-induced strength,” said Newport.

Goods prices worldwide should not collapse like they did in the last recession, but it will be a long way from a seller’s market for the next six months.

The global economy is still struggling to achieve descriptions more positive than “tepid” and “lackluster” and is unlikely to earn an upgrade to “mediocre” soon, said Newport.

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About the Author

Patrick Burnson, Executive Editor
Patrick Burnson

Patrick is a widely-published writer and editor specializing in international trade, global logistics, and supply chain management. He is based in San Francisco, where he provides a Pacific Rim perspective on industry trends and forecasts. He may be reached at his downtown office: [email protected].

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