The BLS’ Import and Export Price Report for June shows Import and Exports prices both declined 0.2% from May. Econoday economists called import prices correctly but expected export prices would be flat.
I reordered the charts in the BLS report to highlight what’s important for GDP purposes.
Imports subtract from GDP while exports add to GDP. With export prices falling more, this report is decidedly net negative for second quarter GDP.
Select Import Prices
Petroleum accounts for most of the import price drop. Other pockets of weakness include automotive vehicles and consumer goods. Prices of agricultural foods feeds, and beverages rose 1.1%
Select Export Prices
Foods, feeds, and beverages account for only 8.8% of exports but that category accounts for nearly all the drop in export prices for both May and June.
US Dollar Effect
The US dollar index peaked in December of 2016 at 103.81. Today the US dollar index sits at 94.46. That’s a decline of 9 percent in 6-7 months.
A falling dollar is supposed to boost exports, making them cheaper. Charts prove that expected boost did not happen.
Balance of Trade
Balance of Trade vs. First Quarter
Compared to the first quarter, the trade deficit is running slightly higher on average.
For more details, please see Balance of Trade Deficit Near Expectations: Analyzing the Impact on Second Quarter GDP.
Mike “Mish” Shedlock
Since we import more than we export, both dropping will help our current account deficit. Plus, it means lower prices. A win win.
Unless you are a US manufacturer and the exports are cheaper.
No more Fed rate hikes until 2021 at the earliest. In other words, not until the very tail end of the next “recovery”, following the upcoming recession.
Deflation coming…but don’t tell the Fed.
Tony Bennett said:
“The US dollar index peaked in December of 2016 at 103.81. Today the US dollar index sits at 94.46. That’s a decline of 9 percent over 1.5 years.
A falling dollar is supposed to boost exports, making them cheaper. Charts prove that expected boost did not happen.”
Not sure you can tell by looking at June numbers. Lead time on international trade (in general with currency hedge) probably 6 months from order to delivery. Going forward will be the tell. As for King Dollar dropping much further … enjoy it while you can. In next financial crisis (china?) it will be bid as safe haven.
Thanks again for your work in this area. It confirms slow US growth for the foreseeable future of roughly 1%. The economy is not going to get a boost from Trump, as I first thought. Lower prices are the only bright spot for the typical US consumer, who has trouble increasing their income.
I am sorry in advance but would like to know what minimum amount would be enough for as an investment and for what period (1-15 years?) in your mind to make profit?
Sorry that this question has nothing to do with your post. I might be having some money available and don’t want to invest here in Europe. A post about investment opportunities would be most appreciated.
That is a good question to put to Mish, but almost impossible to answer I think. It will depend on how much risk you are willing to take, where you plan to use the proceeds etc. Examples… you invest in say BTC and gain 1000% in half a year or lose nearly everything, you invest in US stocks that may give a steady return once returned into Euros but might just tank, you buy gold and it might double in a year or lose half but eventually gain , you buy realty somewhere and make a steady return on rent but end up just covering the loss in price if values tank… it is really not obvious… big funds tend to have steady low returns, but outside of that it is good to stick to something you know about… so for example I know a region, and where is sought after in that region, where has future value but is very cheap ( if you look and are patient) at present for say land, and know that with a little effort I could double or more an investment in a year, so that is where I might invest because I would also be buying a useful asset ( and no, I’m not proposing anything, it is an example)… but each person will give their own answer to your question, and it would be interesting to hear them… personally I would stay close to hard assets , productive enterprise like agriculture etc. simply because there is a lot of persistent value in those that is tangible…. sure others will be aware of where in their world of interest is promising and sound at the same time…but no one will really be able to guarantee you anything.
My only real advice would be to be patient and never be rushed into anything without good research, you are much more likely to miss losses and not profits by being careful. If you want somewhere safe while you wait then choose some diversity of currencies, some precious metal etc., look at own offshore company formation… a lot of these things are not expensive, take only a little know how and you will find some common basic advice on the web as to how and what advantages/disadvantages there are.
Jarhead John said:
We know that President Trump “Always” sticks to his campaign promises…To that end, the dollar rout is just beginning…
Economist are dumber than rocks. They are the only group of people who do Absolutely nothing. Produce nothing, earn nothing and never get a prediction correct. Oops! I forgot weather people. Them are assholes too. Both sit andook at charts and maps and predict everything wrong.
World wide economic collapse is leading the USA into double dip depression.
Proof read please said:
Mish said: The US dollar index peaked in December of 2016 at 103.81. Today the US dollar index sits at 94.46. That’s a decline of 9 percent over 1.5 years.
So how do you get 1.5 years on that? Dec. 2016 to July 2017 is more like 7-8 months. Mish must be in a time warp!
I meant to type 0.5 years but changed to 6-7 months