The official press release on the publication of US trade data for January concentrated on the shrinking of the monthly deficit between December 2009 and January 2010.(1) Coverage in the Wall Street Journal similarly referred to 'the narrowing trade gap.'
This analysis shows that it is misleading to use single month's figures without looking at wider data. It is clear that the trend of the US trade deficit is widening again significantly and January's figures were a normal fluctuation within this. This is shown in Figure 1, which charts monthly data for the US trade deficit, and Figure 2 which shows the monthly data calculated as a three month moving average in order to remove the effect of purely short term fluctuations. Both show that since May 2009 a clear and significant trend of widening of the US trade deficit has occurred - reversing the earlier improvement that took place after July 2008.
Figure 1
Figure 2
Taking figures the monthly US trade deficit reached its narrowest point at $25.8 billion in May 2009. It widened to $37.2 billion by January 2010.Taking a three monthly moving average the monthly US trade deficit reached its narrowest point at $27,0 billion in June 2009. By January 2010 it had widened to $37.8 billion.
The fundamental trend to widening of the US trade gap is therefore clear.
Notes
1. Its first sentence read: 'The U.S. Census Bureau and the U.S. Bureau of Economic Analysis, through the Department of Commerce, announced today that total January exports of $142.7 billion and imports of $180.0 billion resulted in a goods and services deficit of $37.3 billion, down from $39.9 billion in December.'
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