Friday, May 8, 2009

A Shrinking Trade Deficit, at Least for Now


The New York Times - THE American trade deficit is collapsing at the fastest rate ever, a testament to the ability of a worldwide recession to sharply reduce global economic imbalances that had grown to unprecedented size.

The United States estimated this week that the trade deficit, as a percent of gross domestic product, fell to 2.4 percent in the first quarter of this year.

That is the smallest deficit in a decade, as can be seen in the accompanying chart. It is less than half of the deficit shown in the first quarter of 2008, when the American recession was new and not yet devastating other economies.

Few countries have reported first-quarter data as yet, and the American number will be revised. But what appears to be happening is that much of the pain from the fall in American consumption is being felt in other countries, since exporters in those countries supplied the products that Americans are no longer buying.

Declining trade deficits in the United States are likely to be matched by falling trade surpluses in countries that have historically been net exporters. That is one reason Germany’s economy appears to be faltering badly and China has embarked on a huge economic stimulus program.

The shrinking trade deficit is not being caused by a rebound in American exports. They are falling as well, but not nearly as much as imports are declining.http://www.nytimes.com/2009/05/02/business/02charts.html

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