The disconcerting downward trend — consecutive record months, on track for three straight record years — could ultimately lead to a $1 trillion manufacturing trade deficit in 2016.
[Reposted from Industry Week | Matt LaWell | September 3, 2015]
Two prominent manufacturing and economic analysts suggest that U.S. manufacturing trade is, in fact, spiraling into a deficit that could drag the growth of manufacturing in the country.
Alan Tonelson, who founded the RealityChek blog and covers manufacturing and broader economic issues, reported that the U.S. manufacturing trade deficit reached $73.58 billion in July, setting its second straight monthly record and eclipsing by 1.20% the mark of $72.71 billion set in June.
U.S. manufacturing exports dropped 5.29% in July, from $97.52 billion to $93.62 billion, according to Tonelson, who has tracked the numbers for decades for RealityChek and formerly for the U.S. Business and Industry Council Educational Foundation. Manufacturing imports dropped 2.52%, from $170.23 billion to $165.94 billion.
This performance keeps American manufacturing on track for its third straight record annual trade deficit, with the total trade deficit for 2015 through July at $406.57 billion. Year to date, manufacturing exports are down 4.93%, from $690.36 billion to $656.33 billion, while imports are up 2.37%, from $1.09 trillion to $1.22 trillion.
“It looks very likely that in 2016, we’re going to get a $1 trillion manufacturing trade deficit,” Tonelson said. “I don’t think there’s any serious question these manufacturing trade numbers are a glaring sign of weakening U.S. manufacturing trade competitiveness.”
MAPI Foundation chief economist Daniel J. Meckstroth also said he expects trade will be a net drag on the U.S. economy through at least 2017. According to data he presented Wednesday, inflation-adjusted exports are anticipated to increase 1.7% in 2015 and 4.1% in both 2016 and 2017, while inflation-adjusted imports are anticipated to increase 5.4% in 2015, 6.0% in 2016 and 6.8% in 2017.
The strong dollar continues to cause concerns, Meckstroth said, and with a forecast for the dollar to continue its upward trend against the euro and the yuan, those concerns probably won’t waver any time soon.