A shrinking trade deficit was the primary reason GDP jumped in the third quarter. But that trade deficit relief is already reversing.
The October trade deficit swelled to $78.2 billion, a 5.4% increase. It was the second straight month of trade deficit growth.
The September Trade Deficit increased for the first time in 6 months to -$73.3B. The deficit had been getting help from exports out of the Strategic Petroleum Reserve.
As shown by the chart below, the increase this month was from a drop in Exports combined with an increase in Imports. The current value is still well below the record set back in March.
The August Trade Deficit fell for a fifth straight month to -$67.4B. The Deficit is now down an 37% from the high struck back in March.
As shown by the chart below, this is mainly driven by a fall in Imports as Exports have stayed relatively flat.
The trade deficit fell in July to -$70.7 billion. It was the fourth straight month of drops. While the deficit continues to fall from all-time highs, it is very large relative to deficits prior to 2022. Despite the large 33% fall from the -$107 billion in March, the current deficit would have been an all-time record as recently as last June. It is also larger than July 2021.
The June trade deficit fell for a fourth straight month to -$79.6B.
While the deficit continues to drop from all-time highs, it is still larger than any month before 2022. June eclipsed December 2021 by $750M. December was a new record then, so the current deficit should be put into the context of longer history despite coming off recent highs.
The May trade deficit came in at -$86B. This was another MoM decline but the monthly deficit is still significantly larger than it was at any point before 2022 as shown below. One of the biggest concerns is the Services Surplus contracting by 8.1%.
There are a number of signals that the US economy is getting weaker even as inflation gets stronger.
In other words, we are hurtling toward stagflation.
The April trade deficit came in at -$87B. This was the first time in 5 months that a new record had not been set (pink dot below). The Net Goods Deficit remained below -$100B for the fifth straight month. This Trade Deficit comes on the heels of an absolutely massive -$108B Deficit in March. It’s likely that some of the April deficit was counted in March, so expect a rebound in the May number.
The March trade deficit came in at -$110B. This obliterated the February record trade deficit of $90B. As the chart below shows, the trade deficit has set a record in each of the last 4 months. It was creeping upwards from -$80B to -$90B before exploding in the latest month.
Despite all the talk about a “strong economy,” nobody was expecting a blistering hot GDP for the first quarter. The consensus was for around a 1% gain. As it turned out, it was even worse than expected. GDP shrank in Q1, contracting by 1.4%.
Despite the awful number, the mainstream spun it as a positive. Peter Schiff called it an outrageous positive spin on negative GDP and a great example of Orwellian doublespeak.
