Implications: The total volume of international trade – imports plus exports – increased 2.7% in May and is up 25.4% versus a year ago, right before the V-shaped recovery began. We expect more increases in global trade in the months ahead, despite financial turmoil in Europe. Recently, the trade deficit has been expanding again. This means the return to solid growth in the US is trumping, at least temporarily, the impact of a lower dollar (versus several years ago). The result is imports rising faster than exports. While some may worry about this trend, during recent decades a rising trade gap has been associated with a strong domestic economy, not a weak one. Moreover, as we explain more thoroughly in yesterday's Monday Morning Outlook, Americans generate much higher returns on the assets we own abroad – like direct investment in factories in emerging markets – compared to what foreigners earn on US-assets (such as Treasury securities). As a result, the US has more of an ability than any other country to run significant and persistent trade deficits.
Click here to view the entire report.
|
|
Posted on Tuesday, July 13, 2010 @ 9:36 AM
|