The dollar decline is having some positive effect on the trade balance. Trade balance does not change immediately, but there has been improvement. Exports are up so the trade gap is closing and the service surplus is widening. The numbers look stronger when petroleum imports are excluded. The trade deficit in good has closed by over $5 billion since a year ago because exports are up over 13% YOY. While food exports are very strong, we are seeing double digit increases in some manufacturing sectors.
Since May exported ex petroleum are up 5.66% while imports are up only 2.34%. The slowing of imports is also associated with our slowing economy but the export business is related to strong growth in the rest of the world as well as the dollar decline.
Seems like we have forgotten the strong dollar policy.
Strong dollar policy ? Sounds nostalgic to me. I do not know that anyone had augered the depth of the recent dollar declines. Can it " act " like a true commodity in that it reaches oversold levels ? Sure, but it going to take a hell of a lot of fundamental changes before we see some steady upticking. Both sides of the aisle are the culprits on the once mighty greenbacks demise.
ReplyDeletetrends in prices are driven by trends in the fundamental and there is little on the horizon that will change the current direction of the fundamentals. Even an improvment in the trade balance will take a number of quarters to close:
ReplyDelete1. energy imports will not change
2. slower world growth will slow exports