by Alexander G Rubio
Fri Aug 12th, 2005 at 01:24:58 PM EST
The price of crude is really starting to make itself felt in the American economy. The June trade data (PDF format) has been released by The Commerce Department, and the imbalance between what America sells abroad and what it imports rose to $58.8 billion in June, up 6.1 percent from the May deficit of $55.4 billion.
Exports rose by $52 million to a record of $106.8 billion, but that was offset by $165.7 billion in imports, up by $3.44 billion.
Higher oil prices contributed to the state of affairs with the total imports costs running to $19.9 billion, an increase of 9.8 percent from the month of May.
The US-Chinese trade tension is sure to flare up again on the back of an increase in Chinese imports into The United States to a new record of $21 Billion. Considering that west coast ports in the US has gone on overtime from the end of July to handle the increase in shipments from China, it hardly looks like this will be the last month to set a record.
The really bad news is that the June tab at the crude bar wasn't even that bad when compared to the inevitable bill for July, when prices were quite a bit higher.
As General Glut's Globblog points out; the only way to turn this around is through deep cuts in consumption.
The good news is that US export growth is faster, up 11.7% this year. The bad news is that total non-petroleum imports are 37% larger than total exports, the upshot being that with non-petroleum imports growing 11.5%, total exports would have to grow at a nearly 16% pace just to keep the trade deficit stable. And that's assuming falling oil prices (due to ever-rising petroleum import levels).
There is no way in hell that nominal US exports are going to grow at a 16% annual rate. It hasn't happened since 1988, and it occurred back then thanks to a huge export boom in agricultural products and steep export price inflation. It also happened in 1973-74 and 1978-80 for the very same reasons. This will not happen today. No way. Impossible.
But as the consumer accounts for more than 70 percent of economic activity in the US at the moment, a slowdown in consumption is a terrible thing to contemplate as well.
This article is also available at Bitsofnews.com.
