Best US Trade Deficit Since 2009
Figures released by the US Census Bureau show that the US balance of trade is at its best level since October 2009.
The US trade deficit is now at its lowest point since that date and currently stands at $34.22 billion for the month ofJune 2013. That’s an enormous reduction from the May 2013 figure of $44.1 billion. Predictions had tentatively suggested that there would be a marginal decrease of just over $1 billion from $44.1 billion to $43 billion. The 22.4%-drop in the trade deficit issued by the Census Bureau goes way beyond the previous estimates and may show increasing signs of a bettering economy.
Will the figures, if they are sustained in the coming months, show increasing signs of strengthening support for Barack Obama in the implementation of his economic policies and the tough times ahead regarding the budget approval that he needs? It may, at least, come as a welcome sign that trade talks may be a way of improving still further the balance of trade of the country and that they will enable the closing of that gap even more so in the future. This will be particularly telling for the negotiations that will get underway regarding the US-EU Transatlantic Trade agreements.
- Imports fell by 2.5% and stood at $225.4 billion for the month of June 2013.
- Oil imports have been one of the major causes for the trade deficit that has existed since the 1980s for the USA. June saw a decrease in the amount of oil being imported into the country.
- In fact, the quantity of oil imported in June was at its lowest level for the pasttwo years. That is the knock-on effect of the fact that the US is now increasing its own production of oil. Last year saw the largest ever increase in a single year for the production of all in the country.
- However, the downside to that is that the deficit seems to be more important than the methods that are being used to extract the oil from the country.
- Fracking and the extraction of shale oil and gas is the reason why production has increased, with the destruction of the water-tables and the infiltration of chemicals into the drinking water of millions of Americans.
- US crude-oil production saw an increase in production of about 1 million barrels per day in 2012. That has been recorded as the largest ever increase in one year for the US and in fact in the world.
- The last time there had been an increase anywhere near that figure of 1 million barrels extra in 2012 was way back in 1967, when the country increased production by 640, 000 barrels per day.
- At the moment, despite the fact that the US is the third largest exporter of oil in the world, it only exports 10% of all world oil that is exported at the moment. That may change in the future if production is maintained and increased.
- Despite the fact that it has had little effect so far on the price of oil, it may change the face of the price of a barrel in years to come.
- Although, if other countries such as Russia and Argentina (which are also supposed to have oil reserves that could be unleashed by fracking) use the same techniques then it could have a counter-effect.
- Energy consumption increased in 2012 by 1.8% in the world and China and India were both responsible for about 90% of that increase.
- Imports of goods and services dropped for June to $225.4 billion (-2.5%).
- Imports from China decreased by 2.2%, thus reducing the trade deficit between the two countries from $27.9 billion to $26.6 billion.
US exports rose, while imports fell for June 2013. Exports saw a 2.2%-increase reaching $191.2 billion and was primarily due to the increased export of engines for aircraft, telecommunications devices and equipment as well as farm goods.
- Exports to the EU increased by 1.5% for June 2013.
- However, looking back at the first half of 2013, exports to the EU had decreased by 5.5%, showing signs that the EU-US partnership in trade has a healthy effect on trade figures for the country. It is also perhaps a sign that the EU economy is at last showing some signs of much-needed improvement.
- Exports to China saw an increase of 4.5% for June.
- Exports to China have stood at only 4.2% since the beginning of the year.
As a result, the figures had an impact on analysts and saw the revision of Gross-Domestic Product growth in the US. Goldman Sachs immediately upgraded its 2nd-quarter growth estimates and there was an increase (+0.8%). That’s a revision from 1.7% growth to 2.5%.
An improving trade deficit means that Americans are buying more home-made products than they would have otherwise bought in the past and that companies are succeeding in selling more to overseas customers. But, the deficit is still there. The question remains as to whether or not the US economy will firstly rely more on more on the fact that it is primarily the fracking process that is enabling the economy to see this improvement and secondly whether or not the administration will be prepared to forego the environmental aspect and also the health side of things with regard to this extraction process simply in the name of an improved economic deficit. If it is prepared to undertake this extensively, and it looks as if it already has, then other countries will certainly follow suit in a bid to counter-act it.
The UK has already begun the first stages of the process. The Chancellor of the Exchequer in the UK, George Osborne, stated yesterday that “There is an energy revolution underway in the US and China that has dramatically reduced energy costs meaning manufacturing businesses are returning to the US”. He went on to state: “It would be a real tragedy for Britain to allow this energy revolution to bypass our country. It would mean we would have much higher energy costs than other countries, it would mean jobs would go to other countries and we would lose out”.
However, despite pressure from extraction companies on the Obama administration to interrupt water-contamination inquiries, it has been shown that those that are living within just 1 mile of extraction sites are liable to have their drinking water contaminated. There have also been worries about the fact that methane has been known to build up in pockets in water pipes and there is considerable risk of it igniting.
Surely, if the answer to the revolution of energy and the re-launching of our economies depends upon the new method of gas and oil extraction, then it must be done so alongside the safe monitoring of people’s health and the distribution of the water supplies at the same time.
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