Wednesday, July 13, 2011

The nation's trade deficit increased in May. The "why" is shown in two easy line graphs...

The US trade deficit increased last month from the prior month. A trade deficit occurs when a nation's exports are LESS THAN its imports. This means its Net Exports (N(x)) are negative.  Look at the right-most tips of the lines on the graph below.  The BLUE line shows the US had a total trade (goods and services) deficit of roughly $52 Billion dollars just for the month of May. The import of crude oil (BLACK Line) is roughly $32 Billion of the total trade deficit, or 62% (32/52=.615)!! The difference between these two lines is represented by the RED line. What are we doing to minimize our dependency on this stuff? Rhetorical question--we all know the answer...
Source: Calculated Risk
It is not because of a lack of effort on the export side of the equation (goods and services we make and sell to foreigners), as shown in the graph below. Our exports are recovering nicely (RED line) and almost back to a historical high.  As we recover, we are either consuming more oil overall (domestic production + Foriegn imports) OR we are producing less domestically, hence importing more. I am not sure which it is, to be honest....Any ideas???

Source: Calculated Risk
View My Stats