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By the Numbers

Featuring brief segments of economic analysis from our senior economist Michael Bazdarich, PhD.

The economic analysis we previously featured in By the Numbers is now available on the Western Asset Blog. This page will no longer be updated.

September Exports Slough Off August Gains

Foreign trade provided a substantial boost to GDP growth in the third quarter, thanks to rising exports and falling imports. Much of that improvement seemed ephemeral, however, and, indeed, it was largely reversed within the September trade data released today. Exports fell and imports rose, erasing most of the improvement in the trade deficit seen in July and August.

Actually, exports have been sluggish throughout the year. As seen in the accompanying chart (blue line), net of oil and motor vehicles, exports had gone flat this year through July. While August saw a nice gain, it was reversed in September. Meanwhile, those August gains in “underlying” exports were augmented by ongoing increases in exports of petroleum products and by a one-time spike for motor vehicles.

The August gains in vehicle exports were driven by an especially short model-year changeover. With the new model year then commencing in September, vehicle exports fell back to more normal levels, along with most other vehicle production/sales indicators. Thus, the August gains and September losses seen in the blue line for “underlying” exports were even sharper for headline exports (green line), thanks to the swings in the vehicles data.

Beneath all the monthly noise it is clear that export growth has slowed in 2014, even as underlying import growth has continued (red line). While many perceive a broad-based improvement in the economy this year, there is no support for that from the foreign trade trends.

Now, there has been steady improvement in the oil patch, with rising exports and falling imports there throughout the last four years. Oil production has been a consistent plus for the US economy, but it is not a huge one. Thus, the overall economy languished over 2011–13 despite oil patch improvement, and much of the same thing is happening this year.

Real Foreign Trade
September Foreign Trade Growth Chart
Source: Census Bureau. As of 30 Sep 14.

Michael Bazdarich

Product Specialist/Economist

Mike brings more than 45 years of experience to his position. "By the Numbers" will address economic data releases that are pertinent to a broad range of investors.

Prior to joining the Firm in 2005, Mike ran his own consulting firm, MB Economics. He earned his PhD in Economics at the University of Chicago.

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