Washington hopes that exports will help lead us out of the slump. But the latest data on our international accounts from the Commerce Department is not encouraging:
http://www.bea.gov/newsreleases/international/transactions/transnewsrelease.htm
Our first quarter current-account deficit rose to $109.0 billion from $100.9 billion in the last quarter of 2009. The growth in our trade deficit from $140.1 billion to $151.3 billion accounted for all of the increase. In other words, our imports surged by approximately $11 billion more than our exports. That's not a good omen.
Take a look at the chart below. You can see that our trade and payments balances have increasingly fallen into negative territory over the past 30 years. Recessions have brought corrections to that trend and the deficits have shrunk in those years. That's because, as our income fell with recession, we bought less from overseas. But as soon as the economy began to grow again, we ended up spending more abroad than we had before and the deficits became ever larger.
Balance on Current Account
(Click on chart to enlarge.)
Recessions shaded
Current developments forecast a return to these trends. As our economy recovers from the recent recession we can expect our imports to grow more rapidly than our exports. This will boost our trade and current-account deficits so that, before too long, we will probably be into record negative territory.
Exports may grow, but that doesn't mean they will grow more rapidly than imports.
(The charts were taken from http://www.beyourowneconomist.com. [Click on Seminars and then Charts.] Go there for additional charts on the economy and a list of economic indicators.)
© 2010 Michael B. Lehmann
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