by Bill McBride on 8/10/2006 11:32:00 AM
Thursday, August 10, 2006
The Census Bureau announced the U.S. trade deficit for June was $64.8 Billion. I recommend Professor Chinn's discussion of the trade deficit with most of the graphs I was going to post (and more): The June 2006 Trade Figures
Click on graph for larger image.
This graph is similar to Chinn's figure 1. It appears the trade deficit, excluding petroleum, might have stabilized (red). This might indicate a slowing U.S. economy and is consistent with a slowdown in the U.S. housing market.
The trade deficit story is really in three parts: petroleum, China, and everyone else. Here is a little more on China:
This second graph is year-to-date imports from China.
Imports from China are still growing quickly indicating that deficit with the rest of the world (excluding petroleum) is falling.
But the growth of imports from China is slowing too. Although YTD imports from China have increase 16.8% from the same period in 2005, this is a significantly lower growth rate than the three previous years.
As the U.S. economy slows, this might put additional pressure on China to revalue the RMB. I'll leave this analysis to Roubini and Setser.
As an aside, Roubini is on a roll: The Next Move by the Fed Will be a Cut, Not a Hike, as the US Slips into a Recession...
ALSO: Roubini in the Financial Times: The world must prepare for America's recession