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Macro Pulse highlights recent activity and events expected to affect the U.S. economy over the next 24 months. While the review is of the entire U.S. economy its particular focus is on developments affecting the Forest Products industry. Everyone with a stake in any level of the sector can benefit from
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Tuesday, October 26, 2010

August 2010 International Trade

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According to data compiled by the Netherlands Bureau for Economic Policy Analysis, world trade volumes in August rose by 1.5 percent from the previous month, following a downwardly revised decrease of 1.0 percent in July. The rise in imports was broad based, while on the export side emerging economies outperformed advanced economies; the Euro Area was the only major advanced-economy block to achieve positive export growth. Japanese import and export volume declined substantially. The volume of world trade has returned to within 2 percent of previous peak reached in April 2008.

Prices also rose by just under 1 percent in August, remaining slightly below the peak of last January and more than 15 percent off the peak of July 2008. Prices seem to have lost a strong sense of direction since early 2010, wandering rather aimlessly instead in a gradual downward trend.
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Turning to the United States, the U.S. trade deficit widened to $46.3 billion in August (from $42.6 billion in July), thanks in part to a record pace of Chinese imports. Total August exports amounted to $153.9 billion, and imports $200.2 billion. The real goods deficit, which strips out prices, widened to $51.2 billion in August from $47.3 billion in July, showing that the larger deficit is not entirely a function of a weaker dollar. The increased deficit dims prospects for third quarter U.S. GDP as trade is unlikely to contribute much to growth.
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U.S. exports of wood pulp, paper and paperboard took another breather in August when dropping by 131,000 metric tons (-4.3 percent) relative to July. Exports are also slightly below August 2009’s level. Imports gained slightly in August and remain above year-earlier levels.
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Softwood lumber exports gained a little momentum (7.2 percent) in August and stood nearly 32 higher than in August 2009. Lumber imports weakened relative to both the previous month (-9.7 percent) and year (-7.8 percent).
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With the U.S. dollar weakening in September against a basket of other currencies, we would not be surprised to see the September trade gap tick higher. A weaker dollar makes U.S.-made products relatively more attractive in both the domestic and export markets, but it often worsens the trade deficit because more dollars are required to buy the equivalent volume of imports. Conversely, a stronger dollar stunts demand for domestic products, but improves the overall trade deficit.

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