Exports, Imports, and Balance: What International Trade Tells Investors About The U.S. Economy
At 8:30 EST/12:30 GMT The Bureau of Economic Analysis released their monthly report on U.S. exports, imports, and balance of goods and services for June 2014.
The BEA economic report release calendar is here:
Goto the “U.S. International Trade in Goods and Services, June 2014” here:
But if you are interested in nuts and bolts beyond the headline numbers you can find the full release by clicking on this button here:
It will take you down this rabbit hole:
Online PDF page 4/report page 1 provides the first tier of broad summations of gross numbers for goods and services exports (goods and services go out = money comes in = revenue), imports (goods and services come in = money goes out = expenses), with the difference between the two being the trade surplus or deficit (revenues – expenses = earnings.)
Think of a nation as being just like your own household. You goto work, you provide labor or risk, you are compensated for your contribution to society, you receive income or revenue. To live and exist at whatever standard of living you choose you have expenses for housing, food, utilities, transportation, etc. At the end of the paycheck/month/year you will have a balance of the expenses subtracted from the revenues which may be a positive or negative number. If you spend all of your money and then a little more you will have a deficit, a debt. You’d better continue producing labor or risk to receive more revenue to both pay off that debt + ongoing expenses. (You also go home and provide goods and services within your own household, so think of that as the economy that has very little to do with international trade.)
A nation functions the same way. American businesses export goods and services to the rest of world (RoW) for revenue: export products, import cash. And both American businesses and consumers import goods and services from RoW at an expense: import products, export cash.
For decades the U.S. has run an ongoing trade deficit.
A trade deficit means that we’re spending more than we’re earning. We’re exporting cash. Cash is the same thing as labor or risk.
But maybe what you’re really interested in is seeing what goods and services U.S. businesses are exporting to determine who may be benefitting or impaired by changes in exports? In the May report business sector exports can be found on PDF pgs 6 and 9, report pgs 3 and 6.
Of notable disparity distinction is the difference between automotive and consumer goods, PDF 6, report 9.
Export $13,654M of vehicles.
Export $17,158M of consumer goods.
Consumers. Tsk, tsk, tsk. 🙁
Drop down to PDF pg 11, report pg 8, and you can see how even smaller divisions of the sectors performed. Looks like Year-To-Date our biggest YoY improvement has been in corn exporting, while industrial use nonmonetary gold has taken a monster beating.
Why is this important, and how is this relevant?
When QE3 ends at the end of October 2014 the immediate effects of easy money’s withdrawal from banking and business functions should show up through November and reported January 2015. When the Federal Funds Rate (FFR) is raised in the second half of 2015 (2H15) the immediate effects should express themselves the relevant month to be reported two months later.
Additionally, as the Federal debt ceases to increase (remains level), the FFR is raised, employment and housing show YoY improvement the value of the U.S. dollar should improve. As the EU continues to show general weakness (aggravated by the Ukraine conflict) the euro weakens.
A “stronger” dollar makes buying imports (exporting cash) cheaper and selling exports (importing cash) more expensive. Weaker currencies abroad, relative to the U.S. dollar, have the exact same effect making it more difficult for them to buy American products but great for their businesses
Our huge national debt has not only made our banks become stronger but the resulting devalued dollar has also been a boon to U.S. exporters.
Diversified machinery, by market capitalization: http://tinyurl.com/kp4pvs5
If the U.S. dollar improves relative to other currencies, across the next twelve months exports will likely decrease, while imports and deficit increase. This will have an adverse effect on the revenues, expenses, and earnings of domestic businesses and indices.