Monday, December 12, 2016

Trade and Other Stuff: "The (No Longer) Almighty Soybean"

Consider the humble soybean...*
From the Council on Foreign Relations' Follow the Money blog, Dec. 7:
The U.S. trade deficit rose in October.

One reason (no surprise): Soybeans. Seasonally adjusted, monthly soybean exports are now $3 billion off their July and August peak. Actual soybean exports—in billions of dollars—rose in October. As they should. Soybeans have real seasonality: U.S. exports peak after the harvest. The seasonal adjustment seeks to smooth out this natural month-to-month volatility.
The good news from the summer is now mostly behind us. Still, as a result of the out of season exports—and higher prices—the U.S. has already exported $7.5 billion more soybeans this year than last.

I want to highlight two other points, both of which are—I fear—a sign of things to come. What I suspect is the beginning of a sustained—though modest by past standards—rise in the petrol deficit, and, more concerning, the growing U.S. deficit in high-end capital goods.

I will not try to replicate Calculated Risk’s always excellent graphs. There is no doubt that the nominal petrol deficit has started to tick up, after big falls for several years (in nominal terms, the non-petrol deficit is back to where it was before the crisis, a shift that hasn’t gotten the attention it deserved).

In real (volume) terms, the U.S. petrol deficit is also starting to rise. The large tailwind that rising oil production, falling oil imports, and falling prices provided for the the overall U.S. balance of payments in the past few years is in the process of turning into a modest headwind.
More concerning, though, is the current weakness in U.S. capital goods exports. Capital goods are the complex big ticket items where advanced, technically sophisticated economies are supposed to excel. Aircraft, turbines, semiconductors, oil drilling equipment, telecommunications switching equipment, and the like. The U.S. now runs a deficit in capital goods—$60 billion in the first ten months of the year, which projects out to $70 billion for the full year....MORE
HT: Economist's View

*From Oct. 28's "Economists React to Third-Quarter GDP: ‘The U.S. Is Roughly on Track’":
...“We reckon the leap in [soy]bean exports contributed 0.9 percentage points to growth….In short, the headline GDP number looks good but the soybean export surge will reverse in [the fourth quarter], and that’s a significant headwind. Even with decent consumption, a further rise in capex and a clear rebound in state and local government consumption, our starting assumption for the quarter is GDP growth of 2%. But the headline today will increase expectations for a December rate hike a bit further; we think the Fed will act.” —Ian Shepherdson, Pantheon Macroeconomics...MORE

 Now there's a guy who digs into the details.