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Hello from UK, where the mood has improved. Seven in ten people are vaccinated against Covid-19 and the economy is reopening earlier than in many neighboring countries.
Today’s centerpiece looks at another success story, that of the American consumer, which is making many exporters happier due to a spending spree on goods, many of which are imported from overseas.
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Demand for durable goods has led to an import boom
Yesterday’s trade secrets explained how, despite Joe Biden’s protectionist rhetoric, the new US president proved a blessing for world trade. The reason is that many Americans will feel richer thanks to its $ 1.9 billion stimulus – some of which will inevitably be spent on goods coming from abroad.
Today we are talking about the surge that has already happened.
Two factors have helped exporters to the United States. The first is that the economic situation in the United States has improved rapidly after hitting a low point in the second quarter of 2020. The labor market is in better shape, while government support programs have had the effect of stimulate spending. The second is that with the closure of many local businesses, the US portfolio has shifted from spending on services to consumer durables.
Here are the details of what has happened so far.
The United States’ trade deficit for goods has skyrocketed due to the pandemic. It rose to $ 91 billion in March, up $ 25 billion from the same month last year, making it the highest figure since the records began after World War II. Figures released later today for the total trade deficit, which includes services, should show a similar picture.
Most of this is due to heavy imports of goods, which rose to $ 233 billion in March, a double-digit increase from the same month last year. Although this is the month the pandemic really started to bite, the current level is still well above the 2019-18 average of $ 209 billion, according to official data released late last week.
The big winners in this surge in demand for consumer durables have been China, Mexico and Canada, according to an analysis of official Financial Times data.
While these three countries have long been among the United States’ largest trading partners, smaller players have also seen the value of their merchandise exports to the United States skyrocket. Vietnam continued to perform well, benefiting from some reorientation of trade outside of China due to the trade war between the United States and China.
US imports from Vietnam have grown twice as fast as total imports in the past six months compared to the previous six months. Overall, the Southeast Asian nation has recorded the fastest pace of growth of any major source of U.S. imports over the past three years.
The numbers also give a glimpse of how the US stimulus package will be distributed among global exporters.
Ludovic Subran, chief economist at insurer Allianz, estimated that the stimulus would lead to a further increase in imports of goods and services by $ 360 billion between 2021 and 2022, as American consumers spend their money on goods such as televisions, electronics or cars. those imported from other countries.
Subran believed these additional gains would amount to 1.4 percent of Vietnam’s gross domestic product over the same period, as the Americans sourced from its exports of textiles, computers and telecommunications. Mexico would benefit from an estimated boost of 1.7 percent of GDP.
As the United States begins to open up, the deficit could narrow somewhat. Pooja Sriram, an economist at Barclays, said the reopening could soften demand for goods, with consumers returning to spend on services like gym memberships rather than products like fitness tools. Still, with nearly $ 2 billion to distribute, US consumer demand for durable goods is likely to remain “dynamic”.
The manufacturing boom that started in the second half of last year continues. A recovery in global export volumes, the result of the phenomenon discussed today – a boom in demand for durable consumer goods – has benefited global manufacturers, including those in the euro area. The graph below highlights this.
The line is based on the closely watched Purchasing Managers Index and shows the rate of business expansion remained high last month. The figures were released earlier today and, according to FT Frankfurt bureau chief Martin Arnold, are the highest since the IHS Markit investigation began in 1997.
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