Thursday, February 12, 2009

Top 12 U.S. export markets are falling hard

The Census Bureau's December release reiterates two things about U.S. trade: (1) the U.S. economy is seriously weak, but worse yet, (2) world demand for U.S. goods continues to tank. Import demand generally declines during U.S. recessions with shrinking aggregate demand, while export growth does not uniformly fall during recessions. But in this cycle, one thing is for sure: U.S. export growth is taking a nosedive, and has been negative at least two consecutive months for 9 out of the U.S.' 12 biggest export markets.

This chart illustrates the Bureau of Economic Analysis' measure of real export and import growth over the last eight recession (including the current cycle) since 1960. Generally, import demand falls during recessions with weakened spending from firms and consumers. However, export demand is less uniform in its behavior during U.S. recessions. Annual export growth turned negative during the 1973-75, 1981-82 and 2001 recessions, while it remained very positive during the 1969-70, 1980, and 1991-92 recessions.

But this time, it's going to be bad, because export growth from each of our top twelve trading partners is falling...quickly.

This chart illustrates monthly goods (not including services) shipped to the U.S.' top twelve export markets spanning Jan 2000 to December 2008. The obvious export plunge is underway across the U.S. primary export markets. The top six export markets by share are Canada (20% in December), Mexico (11.3%), and China (5.4%), Japan (5.06%), the U.K. (4.3%), while next six biggest export markets by share are France (2.03% in December), Singapore (2.31%), Belgium (2.35%), Brazil (2.36%), the Netherlands (2.84%), Republic of Korea (2.92%), and Germany (4.25%).

U.S. exports of goods have been declining in nine of the top 12 markets for at least two consecutive months. The U.K., Singapore, and France were the exception, but the December increase in exports to those markets was negligible, and only in December (November fell). But what really matters is the shift in exports to Canada, Mexico, and China, where December exports fell a massive 11.8%, (13% in November) 15% (19% in November), and 0.3% (14% in November), respectively.

The world is weak, as illustrated by the sharp downturn in U.S. exports.

This is why the fiscal bill is so important, as the trade channel for growth is all but dead. In fact, the normal mechanisms that propel the U.S. out of a recession - exports, inventory cycle, durable goods - are all out for the count. The news worsens with each day that passes.

Rebecca Wilder


  1. Just stumbled on your site coming from Calculated Risk and found this post very interesting...

    I do see a mix of experiences on that (great!) graphic that shows imports/exports. Looks like some recessions there is backdrop of continued demand for exports. Some, not so much.

    I take it from your post that a solid export demand has to soften recession — or at least help lead us out. The recent export data is not a particularly positive harbinger, is it?

    Anyhow, good work.

    ps — Moved away from Boston a dozen years ago. I suppose I should enjoy the warmer climate, but I can't see Mass plates and not feel nostalgic... Give my regahds to Fenway, would ya..?

  2. Hi periodista,

    "or at least help lead us out. The recent export data is not a particularly positive harbinger, is it?"

    Nope, not looking good. Exports propped up economic growth in Q1 and Q2 of 2008, but that is long since gone. Thanks for coming over! CR usually has a great report on trade.

    It has been warm the last couple of days - Fenway says hi!


  3. How is fiscal stimulus going to reverse this trend?

    The U.S. has to sell higher quality, lower cost, goods & services, inorder to compete in a world of dirty floats, etc., etc.

    It will never happen. The dollar will be dethroned, repudiated and the U.S. will have to issue a new currency, which will be followed up with a largely state controlled economy.

  4. I predicted Oct 1974 stock market bottom, the Jan 80 gold top, the may 80 t-bill top, the sept 81 bottom in bonds, the oct 82, the feb 83 top in gold, the may 83 stock bottom, the may 83 t-bond top, the jun 84 stock bottom, etc.

    What is your record?

  5. The fiscal stimulus is not designed to reverse a trend in exports - that's called a currency peg (obviously, we don't have that).

  6. The Porklosi-Reid "stimulus" does nothing for the economy.

    No new electric generation plants shall get built.

    No new composite materials factories shall get built.

    No new microprocessor-controlled electronics factories shall get built.

    Not a single thing shall get built, which would lead to reverberating network effects, thus growing the platform to make things of worth that men trade to get (wealth).

    Instead, the "stimulus" amounts to make-work spending for government union workers.

    Only those who supply government with things made in Southeast Asia (computers, computer supplies, telecom gear) shall benefit along with the union government workers.

    Fixing the Economy

    The right and only correct fix has these features

    1) shift scheduled depreciation expense into one-year full deduction expenses

    2) cut the U.S. government FY budget by $1 trillion

    3) force states to cut budgets to year 2000 levels

    4) eliminate U.S. ("federal") income taxes, but keep FICA flat tax

    5) close the insolvent big banks, guarantee the full amount of MZM money in these banks, transfer such money to solvent banks at random; auction off all buildings, equipment; let bondholders and stockholders lose up to 100% of their stakes


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