Thursday, September 18, 2014
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Growing exports sign of rising economic tide

Economics in a nutshell: Growing exports are another sign that the economy is really starting to accelerate."

Growing exports sign of rising economic tide

In this March 27, 2014 picture, a Mercedes-Benz sedans sit inside a car-carrier before being hauled away for distribution from the company´s Vehicle Processing Center in Baltimore. The Commerce Department reports on the U.S. trade deficit for March on Tuesday, May 6, 2014. In February, the gap climbed to its highest level in five months as demand for American exports fell while imports rose slightly. (AP Photo/Patrick Semansky)
In this March 27, 2014 picture, a Mercedes-Benz sedans sit inside a car-carrier before being hauled away for distribution from the company's Vehicle Processing Center in Baltimore. The Commerce Department reports on the U.S. trade deficit for March on Tuesday, May 6, 2014. In February, the gap climbed to its highest level in five months as demand for American exports fell while imports rose slightly. (AP Photo/Patrick Semansky)

INDICATOR: March Trade Deficit

KEY DATA: Deficit: $40.4 billion ($1.5 billion narrower); Exports: up 2.1%; Imports: up 1.1%

IN A NUTSHELL: "Growing exports are another sign that the economy is really starting to accelerate."

WHAT IT MEANS: First quarter growth was a disaster and declining exports were a major reason the economy came to a screeching halt. That may be turning around as the rest of the world starting buying from us again in March. Exports improved sharply with most categories posting gains. We sold more food, motor vehicles, industrial supplies and capital goods, especially aircraft to foreign buyers. A large drop in pharmaceutical sales was the major reason that the consumer goods category didn’t show an increase. Looking across the globe, we posted larger sales almost everywhere, even to China. European demand popped and that is really good news for future growth. On the import side, we also bought a lot more of almost everything and only a major fall off in crude oil purchases kept the total down. We do like our cellphones and that category really grew.

MARKETS AND FED POLICY IMPLICATIONS: This report was good news as exports are a key component of business strategy and we need the rest of the world to buy our products if we are to see faster growth. We need the trade deficit to narrow and the March numbers, when adjusted for inflation, seem to indicate the government overestimated the negative impact of trade on GDP in the initial first quarter report. That could push the growth rate up, though it will still likely be below one percent when all is said and done. But if exports are indeed accelerating, then my expectation that growth will exceed 4% will have even greater support. I have had the four percent number for about five months now and it looks like that is becoming the consensus for the second quarter. I am wondering if I should change. In any event, investors should be glad to see exports rise but at some point, they need to be thinking about stronger growth leading to an earlier than expected Fed rate hike. In any event, the Fed members will like this report as it supports their view that the economy didn’t really tank early this year.

About this blog
Joel L. Naroff is the president and founder of Naroff Economic Advisors, a strategic economic consulting firm in Bucks County. He advises companies across the country on the risks and opportunities that economic developments may have on the organization’s operating environment. An accomplished public speaker, Joel’s humor and unique ability to make economics understandable have brought him a wide following. Reach Joel at joel@naroffeconomics.com .

Joel Naroff
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