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June 2019 Headline Trade Data Shows Slowing Of Imports And Exports

Summary

both imports and exports declined this month.

exports are in contraction year-over-year.

the trade balance marginally improved.

Trade data headlines show the trade balance declined - and both exports and imports declined.

The data in this series wobbles and the 3-month rolling averages are the best way to look at this series. The 3-month averages slowed for exports and imports.

Econintersect uses the import trade data as a factor in determining the acceleration or deceleration of the economy - but does not believe the negative trade balance per se is an economic issue.

Note that the headline numbers are not inflation-adjusted.

  • Headlines said Imports of goods were down month-over-month - import goods growth has positive implications historically to the economy. Econintersectanalysis shows unadjusted goods (not including services) growth decelerated 4.4 % month-over-month (unadjusted data) - down 2.5 % year-over-year (down 2.3 % year-over-year inflation-adjusted). The rate of growth 3-month trend is decelerating (rate of change of growth declined).
  • Headlines said Exports of goods were down month-over-month, and Econintersect analysis shows unadjusted goods exports growth decelerated (not including services) 3.4 % month-over-month - down 4.9 % year-over-year (down 4.1 % year-over-year inflation-adjusted). The 3-month rate of growth trend is decelerating.

  • The headwind in seasonally adjusted (but not inflation-adjusted) for exports was capital and consumer goods. The headwind in imports was crude oil.
  • The market expected (from Econoday) a trade balance of $-55.1 B to $-52.8 B (consensus $54.7 B billion deficit) and the seasonally adjusted headline deficitfrom US Census came in at $55.2 billion.
  • It should be noted that oil imports were down 15 million barrels from last month, and down 33 million barrels from one year ago.
  • The data in this series is noisy, and it is better to use the rolling averages to make sense of the data trends.

The headline data is seasonally but not inflation-adjusted. Econintersect analysis is based on the unadjusted data, removes services (as little historical information exists to correlate the data to economic activity), and inflation adjusts. Further, there is some question whether this services portion of export/import data is valid in real-time because of data gathering concerns. Backing out services from import and exports shows graphically as follows:

z trade1.PNG

Growing exports is a sign of an expanding global economy (or at least a sign of growing competitiveness).

Seasonally Adjusted Total Imports (blue line), Exports (red line) and Trade Balance (green line)

Econintersect is most concerned with imports as there is a clear recession link to import contraction. Adjusting for cost inflation allows apples-to-apples comparisons in equal value dollars between periods. The graph below uses seasonally adjusted data.

Seasonally and Inflation-Adjusted Year-over-Year Change Imports (blue line) and Exports (red line)

Note: In general this is a rearview look at the economy - however, imports do have a forward vision of up to three months ahead of expected economic activity.

Please visit our landing page for a summary of all of our analysis this past week.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.