Looking at the trade balance one may be forgiven for thinking the recovery is still very much in the balance. US trade numbers out this week showed the trade deficit widen to US$39.7bn in February (against a consensus US$38.5bn). Export numbers rebounded by less than anticipated while imported goods rose 1.7% in the month, recovering more than half of January’s 3.7% decline. Although the net trade position will drag on Q1 GDP, HSBC still forecasts 2.4% in a recent note to clients saying they expect to see this fall in exports largely offset by stronger inventories and consumption.
Meanwhile, the March National Federation of Independent Business (NFIB) survey was disappointing. The percentage of firms with job openings fell to just 9% which is only slightly above its all time cycle lows seen last year. Hiring intentions and firms planning capital expenditure also dropped suggesting the ability of companies to ramp up investment and add employees remains very much constrained.
Commentators had been hoping the weak dollar and gradual recovery in overseas markets would lead to a surge of exports. Steel firms in particular are hoping that rising raw material costs affecting overseas mills will give US mills an advantage in export markets. The same hope has been expressed in the UK for the last 12 months where the pound has dropped some 25% against both the dollar and the euro. Up to the end of 2009 though exports were all but unchanged but the Telegraph reports that in February exports jumped 9.5% and the trade deficit in goods narrowed the smallest since June 2006 at £6.2bn ($9.3bn). The issue for both the US and UK, and no doubt Germany whose economy is much more highly geared to the export of plant, equipment and machinery, has been that with the whole world in a recession no one is buying, at home or abroad. Now with signs of more robust growth in markets across Asia and the Middle East, if only tentative recovery in Europe and the US, the comparatively weak currencies of the US and UK should begin to have an increasingly beneficial impact during the balance of this year.
Many US companies have decided they cannot wait for a recovery in the US and are actively trying to develop export markets according to a Chicago Tribune article citing various examples of firms in the state. If U.S. companies doubled their export volumes, 2 million new jobs would be created, President Barack Obama’s administration is quoted in the article as saying. But others point out that exporters often end up hiring workers overseas or moving production there entirely. That may be the case medium to longer term, but it doesn’t seem to be sapping the enthusiasm of many firms both sides of the Atlantic to secure export contracts. The fact is with consumer spending likely to remain depressed for some time to come growth is not going to come from internal consumption this year.