In a time of economic uncertainty, driven by high energy prices, falling consumer confidence and employment losses, there actually is some good news on the economic front. The Commerce Department reported yesterday that the trade deficit beat expectations and declined for the second time in the past four months in May, as exports grew $1.4 billion during the month, double the $0.7 billion rise in imports.
As of the first quarter of this year, exports accounted for 13 percent of the U.S. economy, more than tripple the 4 percent coming from housing (residential investment). And though the most recent four quarters (first quarter of 2007 to first quarter of 2008) improvements in our country’s trade balance have actually added more to GDP growth than housing has taken away. Yesterday’s report is welcomed new that the trend is likely to continue.
Though the first five months of this year, goods exports (mainly manufactured products) increased at an annual rate of 11.5 percent (in real, or inflation-adjusted terms), while imports are down 4.5 percent. And over the 12 months ending in May, exports outpaced imports in every major category: capital goods, consumer goods, industrial supplies, automotive products, and food, feed & beverages.
Healthy growth overseas, a realigned dollar, and the competitivness of American manufacturers is turning trade, which too many view as a toxin to the American economy, into a major source of growth. In fact, over the past year, trade (net exports) accounted for nearly half (44 percent) of our country’s economic growth.
Lets hope politicians on Capital Hill start to get it and help America’s manufacturers by lowering overseas barriers. A good start would be to pass the free trade agreements (with Columbia, Panama and Korea), that are awaiting Congressional action.