Most media commentary on the July US trade figures continued to concentrate on very short-term month-by-month shifts rather than the underlying trend. Thus Christine Hauser in the New York Times opened her report with: ‘The United States trade deficit narrowed by 14 percent in July as exports by American companies rose by about $2.8 billion, suggesting that trade would be less of a drag on growth in the months ahead.’ And Sara Murray in the Wall Street Journal gave as the first first sentence of her report:‘The U.S. trade gap narrowed sharply in July’. Neither dealt with underlying trends.
In fact, the US July trade deficit of $42.8bn was the second worst since the US trade deficit stopped contracting under the impact of the financial crisis in May 2009 – at which time its level was $24.9bn. Only June’s $49.8bn deficit was worse than July's – see Figure 1.
Taking a three-month moving average, to eliminate purely short-term fluctuations, the monthly US trade deficit has expanded from $40.5bn in May, to $43.9bn in June, to $44.8bn in July – see Figure 2. This compares to a low point of $26.8bn in June 2009.
As can be seen in Figures 1 and 2 below, the trend of the US trade deficit is clearly continuing to widen despite slow US economic growth. Not until media analysis concentrates on the underlying trends, rather than month-by-month fluctuations, will an accurate picture of the widening US trade deficit be presented. References to unpleasant ‘surprises’ may be anticipated in coverage of the US trade deficit figures in the coming months given the media failure to outline the underlying trends.
Figure 1
Figure 2
Comments