The U.S. dollar has struggled to hold its own against the euro. Since hitting a year-to-date low of $1.25 to the euro in March, the dollar has lost almost 25 cents, plummeting to $1.50 to the euro this month. But as the dollar remains weak, gold and oil become more affordable to foreign markets, and U.S. exports are at least more competitive overseas.
The country has been campaigning heavily to entice as many small- and medium-sized enterprises that it can to get involved in international trade. Congress is wading through hearings to remove any obstacles that might exist to small businesses entering the global marketplace, while the United States Trade Representative's office is exploring amending established, as well as pursuing new trade agreements to bolster exports. This is a prime pillar for the nation’s economic recovery and long-term growth. And it’s particularly poignant with the projected budget deficits over the next decade.
The good news is that in August, the United States trade deficit continued to shrink, falling from $31.9 billion in July to $30.7 billion. This decrease was fostered by a slight $200 million increase in exports and a more significant $900 million decline in imports. Maybe most importantly, this was the fourth consecutive month that the export of U.S. goods and services improved. Though at the same time, it also illustrates the sustained weakness that the dollar has suffered through.
Across the Atlantic, France and Germany have already declared themselves free of recession. The United States is impatiently waiting its turn. Thankfully, these numbers show that the country seems to be on the right path.
“We’re encouraged by the continued signs that the U.S. and other major economies are beginning to expand again,” said U.S. Commerce Secretary Gary Locke. “But we must remain steadfast in our effort to boost U.S. exports and put Americans back to work.”
In August, the U.S.’s trade deficit with the European Union (EU) shrank, falling from $8 billion in July to $5.4 billion, primarily because exports from the EU are down 20%. The 16-nation Eurozone saw its own trade balance collapse considerably from July to August, decreasing from $18.3 billion to just $5.9 billion. Total exports for the Eurozone were down 5.8%, while imports declined 1.8%, and both figures were down more than 23% compared to the same period last year.
Demonstrating the severe impact the global economic decline has had on both the United States and Europe, the EU’s trade surplus with the U.S. fell from $57 billion through January-July 2008 to just $33.3 billion for the same period this year. It has been a tough time for the world’s two largest economies.
But, it is welcomed to see that United States’ two largest trading partners—Canada and China—somewhat renewed their thirst for U.S. goods in August, even if it wasn’t enough to significantly impact the running trade deficit the nation has with both. Exports to Canada increased $1.2 billion in August, while exports to China increased $300 million. Unfortunately, U.S. imports from both countries also ticked upwards, albeit far more modestly.
Despite mounting job losses and bankruptcies, there were more encouraging signs for the U.S. economy in terms of retail sales. Though sales slipped 1.5% in September, weighted down by the nearly 10.5% decline in vehicles sales, the drop was still not as steep as anticipated. In fact, retail sales in the third quarter actually saw the strongest gains in almost two years.
The Commerce Department is optimistic that the healthy increase in sales excluding motor vehicles and gasoline over the past two months—which increased 0.4%— is indicative that consumers are gaining confidence. That spending is at the initial stages of rebound.
“But much work remains,” warned Locke. He is confident that as more stimulus money makes its way into the system in the coming months, it will further promote an upturn and provide more opportunities for America’s unemployed.
Matthew Carr, NACM staff writer. Follow us on Twitter @NACM_National