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News : US Economy Last Updated: Apr 12, 2011 - 3:24 PM

US trade deficit fell in February to $45.8bn
By Finfacts Team
Apr 12, 2011 - 1:53 PM

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The US monthly international trade deficit decreased in February 2011, according to the US Bureau of Economic Analysis and the US Census Bureau. The deficit decreased from $47.0bn (revised) in January to $45.8bn in February, as imports fell more than exports. The previously published January deficit was $46.3bn.

Exports: Exports of goods and services dropped $2.4bn in February to $165.1bn, reflecting a dip in goods exports. Services exports increased slightly.
  • The decline in goods exports was mostly accounted for by decreases in automotive vehicles, parts, and engines; industrial supplies and materials; and other goods.
  • The increase in services exports was more than accounted for by an increase in other private services (which includes items such as business, professional, and technical services, insurance services, and financial services). A decrease inother transportation (which includes freight and port services) was partly offsetting.

Imports: Imports of goods and services decreased $3.6bn in February to $210.9bn, mostly reflecting a decrease in goods imports. Services imports also decreased.

  • The drop in goods imports was more than accounted for by decreases in automotive vehicles, parts, and engines; capital goods; and industrial supplies and materials. An increase in consumer goods was partly offsetting.
  • The dip in services imports was more than accounted for by falls in other transportation and travel. An increase in other private services was partly offsetting.

Gods by geographic area (not seasonally adjusted)

  • The goods deficit with China declined from $23.3bn in January to $18.8bn in February. Exports increased $0.4bn to $8.4bn, while imports decreased $4.1bn to $27.3bn.
  • The goods deficit with the European Union increased from $5.6bn in January to $6.9bn in February. Exports decreased $0.3bn to $20.0bn, while imports increased $1.1bn to $26.9bn.
  • The goods deficit with Canada decreased from $3.8bn in January to $2.9bn in February. Exports were virtually unchanged at $20.6bn, while imports decreased $0.9bn to $23.5bn.

Prof. Peter Morici of the University of Maryland commented before the release of today's data:
"Tuesday, analysts expect the Commerce Department to report the deficit on international trade in goods and services was $44.0bn in February, up from $27bn in mid-2009, when the economic recovery began.

This trade deficit subtracts from demand for US-made goods and services, just as a large federal budget deficit adds to it. Consequently, a rising deficit slows economic recovery and jobs creation and limits how much Congress and the President may cut the deficit without sinking the economic recovery.

Rising oil prices and imports from China are driving the trade deficit up, and these are major barriers to creating enough jobs to pull unemployment to acceptable levels over the next several years. Were the Obama Administration and Republican leadership in Congress to address the trade deficit, economic growth, jobs creation and tax revenues would increase dramatically, and the federal deficit could be cut to manageable levels without fear of killing jobs creation.

Jobs Creation

The economy added 216,000 jobs March; however, 360,000 jobs must be added per month to bring unemployment down to 6% over the next 36 months. With federal and state governments trimming civil servants, private sector jobs growth must exceed 360,000 per month to accomplish this goal.

Americans have returned to the malls and new car showrooms but too many dollars go abroad to purchase Middle East oil and Chinese consumer goods that do not return to buy US exports. This leaves too many Americans jobless and wages stagnant, and state and municipal governments with chronic budget woes.

Now, gasoline prices rising to $4.00 a gallon threaten to further reduce spending on homes and discretionary items made in the United States—leaving many US businesses again scrambling for customers and pressured to layoff workers.

Simply, policies regarding energy and trade with China are not creating conditions for 5% GDP growth that is needed and easily could be achieved to bring unemployment down to acceptable levels.

In March, the private sector has added 230,000 jobs per month, but many were in government subsidized health care and social services, and temporary business services. Netting those out, core private sector jobs have increased only 157,000 in March—that comes to 50 permanent, non-government subsidized jobs per county for more than 5000 job seekers per county.

Early in a recovery, temporary jobs appear first, but 21 months into the expansion, permanent, non-government subsidized jobs creation should be much stronger.

Economic Growth

Since the recovery began in mid 2009, GDP growth has averaged 2.9%, disappointing Administration economists who have consistently assumed 4% growth in budget projections and forecasts for the job creating effects of stimulus spending.

Consumer spending, business technology and auto sales have added strongly to demand and growth, and exports have done quite well. However, soaring oil prices and the continued push of subsidized Chinese manufactures in US markets have overwhelmed these positive trends. Now gasoline prices rising to $4.00 a gallon could significantly slow or kill the recovery and recent modest resurgence in jobs creation.

Administration imposed regulatory limits on conventional oil and gas development are premised on false assumptions about the immediate potential of electric cars and alternative energy sources, such as solar panels and windmills. In combination, Administration energy policies are pushing up the cost of driving and making the United States even more dependent on imported oil and indebted to China and other overseas creditors to pay for it.

To keep Chinese products artificially inexpensive on US store shelves, Beijing undervalues the yuan by 40%. It accomplishes this by printing yuan and selling those for dollars and other currencies in foreign exchange markets.

Presidents Bush and Obama have sought to alter Chinese policies through negotiations, but Beijing offers only token gestures and cultivates political support among US multinationals producing in China and large banks seeking additional business in China.

The United States should impose a tax on dollar-yuan conversions in an amount equal to China’s currency market intervention divided by its exports—about 35%. That would neutralize China’s currency subsidies that steal US factories and jobs. It is not protectionism; rather, in the face of virulent Chinese currency manipulation and mercantilism, it’s self defense."

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