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4 Jun 2015
USD drag on US exports might be compensated by the study labour market – DB
FXStreet (Barcelona) - Economists at Deutsche Bank explain that the in the longer term, a stronger dollar will continue to weigh on the US export sector, but the consumer spending boost as a result on a sturdy labour market will compensate for any drag.
Key Quotes
“The international trade balance narrowed appreciably in April (-$40.9B vs. -$50.6B previously). Within the details of the trade data, exports increased 1.0%, while imports fell -3.3%. As we highlighted in Wednesday’s commentary, this is consistent with an ongoing normalization of West Coast port activity, which had wreaked havoc on the trade data over the past couple of quarters.”
“Net exports subtracted a cumulative -293 basis points (bps) from real GDP growth in Q4 2014 and Q1 2015. This was the largest two-quarter drag from the sector since the first half of 1998, when net exports lopped off -321 bps from inflation-adjusted output growth.”
“If the April trends persist, it is possible that net exports could present a slight upside risk to our current-quarter growth forecast of 2.5%. In this regard, the new export orders components of the manufacturing and non-manufacturing ISM surveys have been modestly encouraging. The former registered a neutral reading of 50 last month after bottoming out at 47.5 in March, while the latter rebounded to 55.0 in May compared to 48.5 in the prior month.”
“To be sure, longer term, a stronger dollar will continue to weigh on the exports sector. However, at present, the resolution of the West Coast port labor strife means that net exports will not be nearly as large of a drag on current-quarter output and may even eke out a small contribution to growth.”
“Keep in mind, the US is a relatively closed economy as exports are only about 13% of GDP. At roughly 70% of GDP, consumer spending, fueled by a sturdy labor market, should more than compensate for the expected drag from exports.”
Key Quotes
“The international trade balance narrowed appreciably in April (-$40.9B vs. -$50.6B previously). Within the details of the trade data, exports increased 1.0%, while imports fell -3.3%. As we highlighted in Wednesday’s commentary, this is consistent with an ongoing normalization of West Coast port activity, which had wreaked havoc on the trade data over the past couple of quarters.”
“Net exports subtracted a cumulative -293 basis points (bps) from real GDP growth in Q4 2014 and Q1 2015. This was the largest two-quarter drag from the sector since the first half of 1998, when net exports lopped off -321 bps from inflation-adjusted output growth.”
“If the April trends persist, it is possible that net exports could present a slight upside risk to our current-quarter growth forecast of 2.5%. In this regard, the new export orders components of the manufacturing and non-manufacturing ISM surveys have been modestly encouraging. The former registered a neutral reading of 50 last month after bottoming out at 47.5 in March, while the latter rebounded to 55.0 in May compared to 48.5 in the prior month.”
“To be sure, longer term, a stronger dollar will continue to weigh on the exports sector. However, at present, the resolution of the West Coast port labor strife means that net exports will not be nearly as large of a drag on current-quarter output and may even eke out a small contribution to growth.”
“Keep in mind, the US is a relatively closed economy as exports are only about 13% of GDP. At roughly 70% of GDP, consumer spending, fueled by a sturdy labor market, should more than compensate for the expected drag from exports.”