April 2010 International Trade: Topped Out or Just Taking a Breather?

Click on graph for larger image

World trade volume decreased by 1.7 percent in April from the previous month, following an upwardly revised increase of 4.0 percent in March, which is close to the highest monthly figure in the data series compiled by the Netherlands Bureau for Economic Policy Analysis (known by its Dutch acronym CPB). Import volumes decreased worldwide in April, with the notable exception of Japanese imports. On the export side, growth was remarkably high in Japan; Central and Eastern Europe and Latin America also performed well. In April, world trade was 6 percent below the peak level reached in April 2008 and 19 percent above the trough reached in May 2009.

CPB also estimates that average world prices rose by 1 percent between March and April. Prices remain 14.0 percent below the July 2008 peak and 6.1 percent above the January 2009 trough.

Click on graph for larger image

Narrowing the focus to the United States, total April exports of $148.8 billion and imports of $189.1 billion resulted in a goods and services deficit of $40.3 billion -- up from a downwardly revised March deficit of $40.0 billion, and the largest deficit since December 2008. The larger trade deficit was in line with our expectation, which was based on currency exchange rates. April exports were $1.0 billion less than March exports of $149.8 billion, while imports were $0.8 billion less than March imports of $189.9 billion.

The March to April decrease in exports of goods reflected decreases in other goods ($0.8 billion); consumer goods ($0.7 billion); and foods, feeds, and beverages ($0.6 billion). Increases occurred in industrial supplies and materials ($0.6 billion) and automotive vehicles, parts, and engines ($0.1 billion). Capital goods were virtually unchanged.

The concurrent decrease in imports of goods reflected decreases in consumer goods ($1.7 billion); other goods ($0.5 billion); and automotive vehicles, parts, and engines ($0.2 billion). Increases occurred in capital goods ($1.4 billion) and industrial supplies and materials ($0.1 billion). Foods, feeds, and beverages were virtually unchanged.

Click on table for larger image

U.S. pulp, paper and paperboard trade bucked the larger trade trend in April; i.e., both imports and exports rose. For a second month, the change in exports outstripped that of imports by a wide margin. Exports are well ahead of year-earlier levels but imports are barely even.

Click on table for larger image

Softwood lumber also swam against the prevailing current during April, in that both imports and exports rose. The change in imports dwarfed that of exports, however.

Click on graph for larger image

Because the greenback appreciated rather dramatically in May thanks to concerns over Europe’s sovereign debt problems, we expect the next report to show a narrower U.S. trade deficit. As we have pointed out in the past, a weaker dollar makes U.S.-manufactured products relatively more attractive in both the domestic and export markets, but it also tends to worsen the trade deficit. Conversely, a stronger dollar stunts demand for domestic products, but improves the overall trade deficit. In a sense, then, what’s good for exporters isn’t necessarily good for the economy as a whole.