Good News! Recession Hits the Trade Deficit
When recession hits people start saving and now we’re starting to see some good in an improving trade deficit.
The trade imbalance worked out to just $40.4 Billion in November led by lower oil costs and also lessened spending by US consumers. The good news is that though we’re running a $40 Billion a month deficit, exports aren’t shrinking nearly as fast as imports which for the long term is very positive news.
Americans purchased 12% less foreign products sending the total imports for November to $183.2 Billion and US exports fell just 5.8% to $142.8 Billion. The global trade imbalance that costs more than a half a trillion per year could soon reach for parity pending the return of the US automotive industry into the global economy.
Unfortunately this is all based on the assumption that oil prices stay at their current levels. The United States imports 5 billion barrels of oil each year which accounted for nearly $750 Billion per year at oil’s peak of $147 and now only accounts for around $195 billion per year at the current price of $39 a barrel.
Lately I’ve taken an interest in comparing this slowdown to the recession in 2003. For people who like history, the current trade deficit is lower than in 2003 which is certainly a good sign for reviving the economy.
Luckily, or not so luckily, the United States was the worst hit with recession meaning that foreign consumers can afford to import US products even as US consumers are cutting back. A cash strapped economy might not be so bad after all…
