Real exports have now increased five straight months, after dropping sharply in the first quarter. Exports surged in the second quarter, in part because they plunged in the first. For the third quarter, supply chain managers may expect modest growth.
“The trade deficit zigzags from month to month—in the past 12 months it has been as high as $45.0 billion and as low as $36.0 billion,” says Patrick Newport, a U.S. economist with IHS Global Insight. “Until recently, it had also been shrinking because of declining imports of petroleum products. Now, it appears to be stabilizing—and it will likely get wider soon as the pickup in US growth brings in more imports.”
IHS economists say there is less to the automotive surge than meets the eye.
“The U.S. exports ‘intermediate’ inputs and later imports the assembled products,” notes economist, Michael Montgomery. “The border is just a line on the map to an industry that has been continental for almost 50 years.”
Both Montgomery and Newport maintain that the import side was exacerbated by anomalies in automakers’ production schedules as domestic vehicle output surged, according to the industrial production report. The odd vacation schedule distorted both sides of the ledger and should reverse in August.
There was less than meets the eye on oil too. Imports defied recent trends by climbing 1.5% in constant dollar terms, but that fueled an increase in product exports of 7.8%. Inventories of many oil products returned to normal near midyear after the hard winter’s drag and rising exports could resume.
The bottom line is both exports and imports are rising. Most economists consider that a good sign for the world economy. Imports got ahead of exports early in 2014 and exports came back in the second quarter. Decent final sales and inventory swings should put imports back on top in the second half of 2014, but there are no signs of a gross imbalance building.
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