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Improving Trade Deficit A Sign of Improving Economy?



August 12, 2012 – Comments (2)

For June, the United States international trade deficit in goods and services decreased significantly from $48B in May to $42.9B in June. Imports decreased to $227.9 billion in June from $231.4 billion in May while exports increased to $185.0 billion in June from $183.3 billion in May. The level of exports was at its highest ever.

So what does this mean? According to the Wall Street Journal, the decrease in the trade deficit is a sign of a stronger domestic economy and will reflect positively on the second quarter GDP. UniCredit economist Harm Bandholz stated that the numbers show that the U.S. economy is relatively unaffected by the overall weak global economy and could add more than 50 basis points to second quarter GDP growth figures.

2 Comments – Post Your Own

#1) On August 12, 2012 at 11:24 PM, Melaschasm (70.85) wrote:

While increasing exports helps the USA economy, a shrinking trade deficit usually arrives with a weak USA economy.

When the USA economy is booming, we tend to import tons of junk.  When the global economy is booming, we tend to export tons of junk.

Growing exports and a shrinking deficit is either short term volatility, or an indication that the global economy is growing faster than ours.

While it is possible a long lasting shift in economic activity has occurred it is to early to make such a claim. 

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#2) On August 13, 2012 at 3:18 PM, JaysRage (76.29) wrote:

This could be read one of two ways.   

1)  U.S. business selling more good overseas.   Good for U.S. businesses.   Possibly good for GDP.   Yeah! 

2)  U.S. consumer strength is losing ground internationally.   U.S. economy is weakening compared to relatively low international bar. Uh oh.

Port activity is a leading economic indicator and #2 tends to win out most of the time.    

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