- The Washington Times - Saturday, October 10, 2009

U.S. exports rose only slightly in August after months of hefty gains, a sign that the global economy could be slower to recover than economists had hoped.

The Commerce Department reported Friday that the trade deficit unexpectedly narrowed in August as the modest rise in exports was accompanied by an oil-led decline in imports.

After rising far more for three consecutive months, exports of goods and services increased just 0.2 percent in August to $128.2 billion, while imports edged lower by 0.6 percent to $158.9 billion. The resulting gap of $30.7 billion was 3.6 percent smaller than July’s deficit of $31.8 billion.

“This month’s trade report is bad news for anyone expecting to see signs of recovery in trade,” said Christopher Cornell of Moody’s Economy.com. “Worse, it undoes much of the optimism generated by last month’s report.”

Exports increased by more than $3 billion in July, compared with a $228 million rise in August. After soaring by $7.5 billion in July, imports declined by less than $1 billion in August.

“Trade volume has flattened, both in nominal and [inflation-adjusted] terms,” Mr. Cornell said. More worrisome was the decline in the export and import of capital equipment, such as industrial machines, computers and medical equipment.

That could foreshadow a weakening economy. “Investment is a strong coincident indicator of growth, and the declines in these sums suggest a stalling in the recovery,” Mr. Cornell warned.

A $1.3 billion drop in the value of petroleum imports was responsible for the overall $913 million decline in imports. The volume of energy-related petroleum imports plunged more than 10 percent in August, falling from 12.2 million barrels per day to 10.9 million.

This decline in volume more than offset a 3.6 percent increase in the average price of imported crude oil, which jumped to $64.75 per barrel. That’s the highest price for imported oil since November, but it is still about 50 percent below the record high of $125 per barrel achieved in July 2008.

The rebound in auto production spurred the modest increase of $115 million in total exports in August. The export of autos and auto parts jumped nearly $500 million, mostly related to cross-border trade with Canada.

Food exports, led by soybeans, edged nearly $100 million higher. The export of industrial supplies, led by increases in steelmaking materials and gold, jumped nearly $1 billion. These export gains were partially offset by a $1.3 billion plunge in civilian aircraft exports and a net decline of $145 million in consumer-goods exports, which occurred even though pharmaceutical exports jumped nearly $500 million.

Besides the decline in imported petroleum products, U.S. imports of consumer goods fell by $705 million last month and civilian aircraft imports plunged by more than $650 million.

Fueled by the government’s “cash for clunkers” program, imports of auto vehicles and parts jumped by $1.2 billion to $14.6 billion in August.

“The ‘cash for clunkers’ program is a great example of how ill-conceived stimulus programs can leave the nation even further behind the debt eight ball,” said Alan Tonelson, research fellow at the U.S. Business and Industry Council, which represents 1,900 small and medium-sized domestic manufacturers.

“Because the program lacked any ‘Buy American’ or U.S.-content requirements, U.S. government figures show that it mainly spurred the purchase of foreign-brand autos, which remain largely imported and [whose U.S.-assembled vehicles] typically contain high levels of foreign-made parts,” Mr. Tonelson said.

The politically sensitive trade deficit with China narrowed by less than 1 percent in August to $20.2 billion. However, the $143.7 billion year-to-date trade gap with China is 15 percent below its year-earlier level.

America’s cumulative trade deficit for the first eight months of 2009 ($238 billion) is running 52 percent below its January-August 2008 level ($491 billion). That reduction is mostly attributable to the recession, which deepened significantly beginning in September 2008.

Most economists expect the dollar’s declining value, which makes U.S. exports more competitive, will spur an increase in U.S. exports, especially after foreign economies begin to recover.

“Looking forward into the next year, we expect that [inflation-adjusted] net exports will provide a modest boost to the [U.S.] economy,” said Jay H. Bryson, global economist for Wells Fargo Securities. “Recoveries in the rest of the world will boost [U.S.] exports, while sluggish growth in U.S. domestic demand should hold back growth in imports.”


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