Exports of goods are an important part of the US economy; they accounted for 7.6% of GDP as of December 2019. This alone is noteworthy for two reasons. One, it means we make a lot of products in this country, and, two, the rest of the world wants to buy a lot of what we make. And for those who need a little more convincing, please remember that the US is the second-largest exporter on the planet (yes, China is the largest). My guess is that most Americans do not know that we are number two, and being number two is a big deal.
The export of US goods to the rest of the world is providing positive input regarding our forecast for acceleration in the rate of US economic growth in the latter half of this year. The quarterly year-over-year comparison (3/12) is rising in Phase A. It has not yet upward-passed the 12/12, which means an important ITR Checking PointTM has yet to occur. That positive Checking Point is expected to happen soon, and when it does it will confirm that the one month of rise in the exports 12MMT was sustainable. Increased exports are good for firms in that supply chain and by extension good for the nation.
Exports to the European Union (the largest market for US-made goods) are rising. Exports to China have edged upward off a tentative October 2019 low (12MMT basis), and exports in the last quarter were a strong 3.6% above the year-earlier level. It is also encouraging to note that the China exports 3/12 is rising in Phase B. There are tentative positive signals in the 3/12 rates-of-change for Canada and Mexico, too. Europe is discussed first for good reason, as shown on the following table. The EU comprises our largest trading partner. China is a distant fourth in terms of a destination for US goods.
|
Country/Region |
Export Volume in USD |
12/12 |
Phase |
Notes |
|
EU |
$337.2 billion |
5.9 |
Cb |
3/12 is rising in Phase B |
|
Canada |
$292.7 billion |
-2.4 |
Da |
Tentative trough in the 3/12 |
|
Mexico |
$256.4 billion |
-3.4 |
D |
Tentative trough in the 3/12 |
|
China |
$106.6 billion |
-11.3 |
A |
3/12 at 3.6% in Phase B |
The good news in exports is augmented by the fact that the Europe Leading Indicator and the Europe PMI are both rising. Retail sales are at a record-high level with an annual growth rate of 3.1%, which is enough to keep business-to-consumer activity on positive footing as we go forward.
The US balance of trade is often cited by others in discussions about US global trade. A sign of “improvement” is evident there as well, given that the trade imbalance of $852.9 billion (importing more than we are exporting) is smaller than it was at the July 2019 low point (where the trade imbalance was the highest it had been in 31.5 years). A "thank you" to the EU, given that exports to the EU are above year-ago levels. But that is not the whole story. US imports have gone down! US imports from the rest of the world are 1.7% below the year-ago level (12/12), and the fourth quarter came in 5.5% below the fourth quarter of 2018. The rates-of-change suggest that imports will continue to decline off the May 2019 record high.
The world economy is about to pick up speed, and exports will increase along with it. This is a great time to determine how you fit into the global and US economies; compare your rate-of-change to the global and US trends. We would be happy to help you get started.
Alan Beaulieu
President
