US TRADE DEFICIT WIDENS IN APRIL

Even as the US exports are on the increase by 1.2 % ($187.4 Billion), imports grew faster by 2.4 precent ($227.7 Billion).  US is exporting telecommunications equipment, parts for machinery and airplanes as well as autos and auto parts and importing consumer goods, foreign cars, cell phones…

US trade deficit is now up 8.5%  ($40.3 Billion) for the month of April. The deficit so far this year is running at an annual rate of $491.9 billions.

We hear a lot about our supposed increased productivity. But how is this possible? One way to see that this claim of increase in productivity is suspect is by our trade deficit. If we are really producing more, why has the trade deficit been growing steadily from $16 Billion in 1981 to $500 Billion today? We consume a lot more than we produce and the difference can be seen in an unfavorable trade balance. Last time we had a positive trade balance was long time ago, in 1975.

dsg91_500_350

How is this unfavorable trade balance explained? According to Martin Crutsinger (The Associated Press):

The weakness abroad has coincided with less investment by U.S. businesses, possibly out of concern that government spending cuts could hobble economic growth.

What utter nonsense! Can you imagine a business owner who needs to hire an additional employee or purchase a peace of equipment, saying to himself: “You know, I really could make a lot more money if I make additional investment but now that the US government spending is being cut by 2.38%… Forget it!”

Makes me wonder do they ever look at actual numbers before making such nonsensical statements.  To put it in prospective just consider the following scenario:

1. Your yearly earnings are:    $2,557

2. Your yearly spending is:     $3,589

3. You are 39% over budget: -$1,011

Let’s say you decide to be more responsible and not go so much into debt so you cut your spending by a whopping…. $37 or 2.38%! But now, Martin Crutsinger and alike blame your tiny spending cuts for the fact that you are being less productive. Add 9 zeros to the amounts above, so we are talking about Trillions instead of Thousands, and you arrive at an actual US budget numbers (source USDebtClock.org)  It seems preposterous to claim that this insignificant sequester cuts are widening the trade deficit but that’s what we are being told. It makes a lot more sense that an ongoing $83 billion a month of FED’s QE is now leaking into the hands of the consumers where the increased demand for consumer goods is being met by an increase in imports.

united-states-balance-of-trade

Source: tradingeconomics.com

BALANCE OF TRADE | Notes

The balance of trade is the difference between the monetary value of exports and imports in an economy over a certain period of time. A positive balance of trade is known as a trade surplus and occurs when value of exports is higher than that of imports; a negative balance of trade is known as a trade deficit or a trade gap.

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