Trade data for August and for January-August 2016

September 13, 2016

Bottom line:  The tentative signs of improvement in the trade deficit, apparent in the previous month or two, continued to develop in August. These are a) a sharp slowdown in the rate of increase in imports, with some groups now contracting; b) a more mixed picture in exports, with some groups expanding while others are contracting more slowly. This is positive as far as it goes — but it doesn’t go very far…

Specifics:

  • On a seasonally-adjusted basis and excluding diamonds, ships and aircraft, the trade deficit for August declined for the third month running, but only by $10mn, to $1.138bn.
  • The cumulative deficit for January-August (excluding diamonds, ships and aircraft) was up by 50% over the same period of 2015 — $9.7bn vs $6.45bn.
  • The recent improvement in the data owes more to developments in imports than in exports. Thus, the rate of increase of overall imports has slowed to almost zero.
  • Within the main categories of imports, the trend for consumer goods is now negative, that for raw materials is stable at a low level of increase (indicative of ongoing economic growth) and for investment goods is slowing rapidly, but still positive (indicative of future economic growth).
  • More specifically, the boom in vehicle imports is over. In the course of 2016, the trend in imports of vehicles by both households (cars for private use) and businesses (cars for business use and trucks) has swung from strongly positive to strongly negative. This is good news for the trade deficit — but bad news for the budget deficit, which has been kept low thanks in no small part to revenues from the surge in purchases of heavily-taxed cars.
  • The trend in exports has swung to positive in recent months, although the rate of increase is very modest.
  • This improvement has been concentrated in the high-tech and medium-high tech sectors, which comprise about 80% of total manufacturing exports.

Specifically, pharmaceuticals are now showing strong growth, the rate of decline in chemical exports has slowed considerably — but the electronics sector still displays pronounced weakness, although even here, the rate of decline has moderated somewhat.

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