Oil Expanded Exports and Shrunk Trade Gap in April
The economy generally benefits when the U.S. sells more goods, but in this case the reasons for the growth are hampering the recovery
In the midst of an avalanche of lukewarm to negative economic reports over the past few weeks, the latest trade numbers provide some positive news this morning. The trade gap shrunk in April, as exports rose and imports fell, according to the Bureau of Economic Analysis. In fact, exports high another new high during the month. Unfortunately, looking at the cause for these changes provides less reason for optimism.
Here's the chart for imports, exports, and the trade deficit:
Let's start with exports, because they have the potential to have a significant positive impact on the economy. They rose by $2.2 billion to $175.6 billion in April. That's not as big a jump as we saw in March, when they rose by $8.2 billion, but an increase is certainly better than the alternative.
Imports declined by $1.0 billion to $219.2 billion. So they still outweigh exports, but the trade gap shrunk to $43.7 billion -- the smallest it's been all year.
That's all great, right? While it's hard to be unhappy about exports rising and the trade deficit shrinking, the causes of this positive outcome in April aren't very reassuring. Oil served as a major driver of the change. Fuel oil and petroleum products made up $2.1 billion more exports in April, while they drove down exports by $2.1 billion. Put another way, if you take oil out of the equation, then export growth was stagnant, imports grew, and the trade gap widened.
Of course, oil is a part of the equation, and in April it helped. In a sense, the same thing that has hurt the U.S. economy in recent months -- higher demand for oil, which has driven up gasoline prices -- provided a little relief in April. Other nations bought more U.S. oil, increasing exports.
Imported oil could have declined if U.S. consumers demanded less. This possibility doesn't seem very plausible, however, as the amount imported shrunk by a fairly significant 5.5%. This likely signifies that the U.S. became more dependent on its own supply of oil during the month.
Here's a snapshot of the big movers for goods imported and exported in April:
One notable item on the imports side is autos. They fell by $2.8 billion. That could be due in large part to the supply chain issues that Japanese automakers had been experiencing after the recent earthquake that devastated the nation. Indeed, imports from Japan dropped by 25.5%.
So we should certainly not be disappointed to see exports rise, imports fall, and the trade gap shrink. But under the circumstances in April, there's little reason to broadly celebrate this report. One driver of the change was oil, which had more of a negative effect on the U.S. economy overall than the small benefit a slightly better trade balance provides. Moreover, a natural disaster served as a major reason for the decline in imports. Once these unusual economic shocks dissipate, we'll be able to better understand how U.S. trade is trending.
Image Credit: REUTERS/Kimberly White