Tag: capital goods

Exports Lower on Slowing Global Growth in January

The Bureau of Economic Analysis and the Census Bureau reported that the U.S. trade deficit grew from $50.4 billion in December to $52.6 billion in January. Americans imported $233.4 billion in goods and services for the month (up from $228.7 billion the previous month) and exported $180.8 billion (up from $178.2 billion). This was the third consecutive month of a widening trade deficit, and the highest that it has been since October 2008.

A widening of the deficit for petroleum was the largest factor behind this month’s higher overall deficit. Exports of petroleum dropped from $10.6 billion to $9.4 billion; at the same time, imports grew from $37.8 billion to $39.1 billion.

The trade deficit for goods widened in the month, while there was a modest improvement in the services sector. The value of U.S. manufactured goods exported in January was $77.2 billion, down from $83.0 in December. Despite the decline, exports are still up overall from the $70.8 billion registered in January 2011.

Among goods exports, areas of strength included capital goods excluding automotive (up $1.3 billion), automotive vehicles and parts (up $1.05 billion) and foods, feeds and beverages (up $97 million). Declining exports were found among industrial supplies (down $295 million), consumer goods (down $215 million) and other goods (down $548 million). Meanwhile, the largest increases among goods imports were found in automotive vehicles (up $2.4 billion), industrial supplies (up $1.1 billion) and foods, feeds and beverages (up $437 million).

One of the things that definitely stands out with these numbers is the impact of slowing global growth. This is clear with both Europe (with exports falling from $27.2 billion to $24.5 billion) and China (down from $10.1 billion to $8.1 billion). Europe is currently in a recession, and China just announced slower growth targets for this year.

Overall, these figures show that exports have slowed recently due to weaknesses in the global economy. With import growth outstripping export growth, our trade balance has widened. For manufacturers – which contribute 60 percent of our total exports – it will be important for us to regain our footing by selling more of our goods overseas.

This, of course, will hinge on faster growth around the world, but it will also depend heavily on adding new markets and exploring new opportunities abroad. For this, policymakers can be helpful. Among their top priorities: getting the Export-Import Bank reauthorized. Beyond that, Washington should work to expand the number of trade agreements for greater access to new markets.

Chad Moutray is chief economist, National Association of Manufacturers.

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Good Luck, Goolsbee

President Obama will today announce that Austan Goolsbee will chair the White House’s Council of Economic Advisers. Goolsbee, a Chicagoan, will replace Christina Romer. From Lynn Sweet’s blog:

Goolsbee is staff director and chief economist on the President’s Economic Recovery Advisory Board and is also a member of the Council of Economic Advisers. Goolsbee joined the administration after being a top economic advisor to Obama’s presidential campaign.

Goolsbee is on leave as the Robert P. Gwinn Professor of Economics at the University of Chicago Booth School of Business.

Goolsbee has written on investment tax credits, now topical, including a piece in the February 1998 Quarterly Journal of Economics, “Investment Tax Incentives, Prices, and the Supply of Capital Goods.” Abstract:

Using data on the prices of capital goods, this paper shows that much of the benefit of investment tax incentives does not go to investing firms but rather to capital suppliers through higher prices. A 10 percent investment tax credit increases equipment prices 3.5±7.0 percent. This lasts several years and is largest for assets with large order backlogs or low import competition. Capital goods workers’ wages rise, too. Instrumental variables estimates of the short-run supply elasticity are around 1 and can explain the traditionally small estimates of investment demand elasticities. In absolute value, the demand elasticity implied here exceeds 1. (continue reading…)

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