In April, the US trade balance increased slightly. At the time, optimists pointed to this data, and suggested that the worst of the recession might be over. The idea was that consumers were buying more imports, confidence was returning, and if the trend continued, economic growth might resume.The April data also had an international dimension. During the boom years, the huge US current account deficit was engine of world growth. On the back of the US consumer, and her insatiable appetite for cheap goods, China enjoyed double digit growth rates.
The optimism of April was killed by the reality of May. The US trade deficit slipped back, erasing the increase recorded the previous months.
No green shoots here.
1 comment:
The oil price dropped dramatically too over the last year, does the chart exclude oil?
Surely its not desirable for the US to be a massive net importer, as equally it is not desirable in the UK? One of the big unaddressed issues of recent years is these deficits. Currencies are supposed to float to compensate for the deficits and ultimately lead to balance, but the US status as a reserve, and Chinese manipulation are distorting that picture.
It is not a long term solution to be back where we were 2 years ago. The economies surely need to function without huge imbalances for stability?
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