Jan. 6, 2023

What Are Americans Buying And Selling?

As you know, the US is the world's most crucial trading economy. We purchase more goods overseas than any other country by a mile. Favorite products made offshore include the Apple iPhone, Nike Sneakers, and virtually all consumer electronics, all made by factories outside the US Border.

So yesterday, when the latest Trade Report hit my desk, I decided to dive deeply into what Americans are buying.

Wall Street is all a Twitter over this particular report. However, before we look at the particulars, a comment is in order on the overall Trade Deficit for November. The deficit markedly declined from the $73 billion deficit in October. For the first time in a couple of years, the monthly Trade Deficit has begun to trend lower, with November's deficit at $61 ½ billion.

But a Trade Deficit of $61 billion is still more significant than any level before 2021. It has only been since the Covid-19 Pandemic that we have seen deficits this elevated. And it is a clear reflection of the lingering effects of the Economic Lockdown that politicians inflicted on this country. Many businesses failed because they were required to shut their doors. And the trade numbers show us each month what a devastating impact closing those "non-essential" businesses continues to have on the country's trade balance.

Overall the November Trade Balance shows that there is declining business activity in exports, things we sell to other countries, and imports, things we purchase from other countries.

There was a decline in commercial activity on both sides of the export/import ledger. In our exports, the world is purchasing fewer American-made Industrial supplies as well as consumer and capital goods.

The same picture is the case for our imports of foreign goods. Americans bought far fewer Consumer Goods, Automobiles, Industrial Supplies, and Capital goods.

In fact, in this entire report, there is only one bright spot. Pharma Exports are one area in the world's economic trade that shows a substantial gain.

That's right, the one sector that shows growth is the American Pharmaceutical Industry. Now, remember these numbers are from last November, so they're stale, but American Pharma Sales overseas increased by $1.2 billion. And that's an increase just for just November.

In this report, Big Pharma is the only sector with expanding international sales. And the product that drives big Pharma is their widely accepted vaccine for the Covid-19 illness.

What a fascinating series of events have led to this economic triumph. Something that we could not have anticipated, or could we? Two short years ago, researchers first detected Covid-19 in Wuhan, China. Through a remarkable series of events, this illness was transmitted around the globe. Possible vectors for Covid transmission include the military games near Wuhan and free and open international travel and trade.

Governments worldwide took action by enforcing quarantines and lockdowns of entire cities. Economically, those same governments inserted themselves into the commercial transactions for Vaccines. Most of the Pharma sales in this trade balance report have various governments on the other side of the sale. For instance, nearly all the Vaccine sales in the United States have the Federal Government as the buyer. The cost to the citizen is usually zero.

It's a business model that not even the most imaginative B-school graduate could dream up. A product that two years ago had no market, in weeks, becomes the most sought-after new drug ever and gets financed by the world's governments. What a story.

And as we see in yesterday's Balance of Trade Report, the Covid Vaccine is the only real bright spot for the world's most prolific trading nation.


Econ Briefs


The big surprise this morning has been the dramatic drop in German Factory Orders. Down over 5% for November, this is the direct effect of the higher energy costs now impacting the German Economy. It is reported that many smaller industrial facilities shut down in November, unable to pay these new high energy costs.

High Energy Costs will continue to be one of the significant stories in Europe, as they have yet to find an inexpensive, plentiful supply of Energy after the cut off Russian oil deliveries. Germany, the major European manufacturer, is feeling these painful energy costs more than some other countries.

In other news, out of Europe, the European Union reported that continent-wide inflation dropped by 9/10% in November. Still higher than the Europeans would want, inflation was reported at 9.2%. But overall, the general trend of lower inflation throughout Europe continues. We'll have to watch and see if those higher energy costs reported by Germany upset this lower inflation apple cart.

Here in the US, three significant reports are on deck. First Non-Farm Payrolls are expected to show about a 10% drop. The drop is due to a reduction in new hires and those layoffs we've seen reported. Wall Street expects the job picture to decline somewhat, as analysts are looking for a tick higher in the overall Unemployment Rate to about 3.6%.

Also reporting this morning will be the Institute for Supply Management's measure of the Purchasing Managers Index for manufacturing. Look for a solidly positive number, well above 50, at around 55. US Manufacturing continues to perform well.

In earnings today, a poor performance by Rail Car manufacturer Greenbrier Companies, while another pharmaceutical company does well, this time Aurinia Pharmaceutical.