Latest Trade Data Adds to Pile of Economic Worries  

By SBE Council at 7 July, 2022, 4:11 pm

by Raymond J. Keating –

The latest monthly trade data from the U.S. Bureau of Economic Analysis merely adds to the messy pile of worry building regarding the U.S. economy.

In May, U.S. goods and services monthly exports and imports both grew – by 1.2 percent and 0.6 percent, respectively. So far, so good.

However, inflation registered about 1 percent in May, so export growth in real terms gets cut to just about nothing and imports actually shrank in real terms in May.

The trade report offers real data on the trade in goods (excluding services), and both real exports and real imports declined in May. In fact, the May level of real goods exports stood below the December 2021 level. And real goods imports have declined for two consecutive months now. In fact, overall imports – goods and services not adjusted for inflation – were down notably in April and May versus where they were in March.

Before this recent data hit, we saw some hope emerging on the trade front. And real growth might resume, with this recent data just being a pause. Let’s hope so.

Key Takeaways on the Data

However, these latest numbers add to our concerns. What do we take away from this May trade report?

First, inflation is showing itself again as a harsh tax.

Second, exports seem to have stagnated during the first five months of this year, meaning fewer opportunities for entrepreneurs, businesses and workers.

Third, the recent decline in imports signals continuing worries regarding the state of the domestic economy, as nearly all imports are inputs to domestic firms, from retail to manufacturing.

Make no mistake, trade matters a great deal to the U.S. economy, and to the small businesses that make up the bulk of U.S. exporters and importers, that seek new opportunities in the international market, and that use imports in their operations.

Growth in trade is vital to U.S. growth. That’s why part of the policy agenda needed to get the U.S. economy back on a high-growth, low-inflation path is for the U.S. to turn away from protectionism, and return to its leadership role in advancing free trade.

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council. His latest book is The Weekly Economist: 52 Quick Reads to Help You Think Like an Economist.