North American Trade Results

July 13, 2010

The U.S. goods and services trade deficit of $42.3 billion in May was some 7% wider than forecast and the largest deficit since November 2008.  On-year import growth of 29.1% exceeded export growth of 21.0%.  In twelve months between May 2008 and May 2009 while the U.S. was in recession along with many other countries, the deficit had contracted from $61.2 billion to $24.9 billion, but 48% of that shrinkage was reversed just 12 months later.  A severe recession happened because of the build-up of unsustainable international economic imbalance, of which a prominent example was a massive U.S. deficit funded by capital inflows from surplus countries.  The resurgence of the U.S. deficit suggests that earlier improvement was largely cyclical, and the lack of an enduring structural change suggests that the recession of 2008-09, to paraphrase Woodrow Wilson, was not a recession to end all recessions.

The year-to-date U.S. merchandise trade deficit on a census basis was $54.6 billion larger than in January-May 2009.  That’s an average deterioration of $10.9 billion per month.  OPEC accounted for seven-sixteenths of the deficit’s on-year growth.  China and Japan were responsible for another 29%, followed closely by the Western Hemisphere (28.3%) and Europe with a 21.2% share.  A mitigating region was the Pacific Rim excluding China and Japan, against which the U.S. deficit narrowed by $11.8 billion to just $6.7 billion.

After returning to surplus in the first quarter of 2010, the Canadian trade balance recorded deficits of CAD 303 million in April followed by CAD 503 million in May.  As in the United States, Canadian exports and imports both grew briskly between April and May.  To wit, non-energy Canadian exports and imports advanced by 6.3% and 6.2% in the latest month, while energy exports and imports went up 1.6% and 1.2%, respectively.  Auto trade was very lively in particular, with Canadian exports in that sector leaping 20.8%.  Canada’s January-May trade balance was barely in surplus at CAD 355 million versus a deficit of CAD 1.513 billion a year earlier.

The U.S. bilateral trade deficit this year has been greater versus Mexico than against Canada. In May, the disparity reached a factor of 2.6 times, with a shortfall of USD 2.33 billion against Canada and USD 6.15 billion versus Mexico.  The respective year-to-May deficit amount to $13.9 billion and $26.9 billion.

Copyright Larry Greenberg 2010.  All rights reserved.  No secondary distribution without express permission.

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