U.S. seasonally-adjusted real trade data showed a notable upturn in the month of January, with imports gaining across a range of categories. While real imports ended up nearly flat over January 2022, there was substantial variation across subcategories.

In Focus - Devil in the Details

Does the chart above look like a picture of calm? If so, you’ll be happy to accept simple aggregate figures, in particular that real U.S. imports were essentially flat from January 2022 to January 2023 (up 0.3%).

If not – or if that seems wildly different from your recent experience – it’s worth delving into the details.

First, the headlines. The just-released January U.S. trade data showed that seasonally-adjusted real goods imports were up 3.7% from December levels, while real goods exports were up 3.8%. While those numbers look very similar, the U.S. imported 71% more than it exported in 2022.

The January up-turn was broadbased. For imports, every major subcategory was up; for exports, all categories rose except industrial supplies, which was down 1.5% for the month. Across exports and imports, consumer goods was the standout category: exports were up 20.1% while imports rose 6.3% over December.

That upturn in imports is evident in the chart. Instead of showing the actual levels of imports – very different across categories, making visualization hard – it normalizes values so that January 2022 equals 100, allowing one to read percentages off the graph. It depicts two years’ worth of real goods import numbers. The thicker black line is the total. It tells a story in which imports grew 8.2% from January 2021 to January 2022, rose a further 8.0% by March 2022, fell to November 2022, and then recovered by January of this year.

One of the more striking aspects of the chart is the extent to which major trade subcategories varied. To keep the chart legible, we exclude Foods, Feeds & Beverages (less important in container shipping) and Industrial Supplies (in which petroleum products play a significant role). Those categories are included in the total, however.

The three subsectors shown are not of equal size. Across 2022, Capital Goods imports were $892bn, Consumer Goods were $825bn, and Automotive were $394bn (all figures in constant 2012 dollars).

For the Automotive sector (dashed line), the story is one of dramatic recovery, though with plenty of month-to-month variation. From a trough of 81.3 (normalized) in September 2021, imports rose 40.4% to 114.2 this January.

For Consumer Goods, a similar trend in imports reversed sharply after March 2022, when they hit a high of 113.6. Over the eight months to November 2022, they had fallen 27.4% to a low of 82.5. The two months since then have shown an impressive rebound to 93.4, an increase of 13.3%.

For the largest sector, Capital Goods, growth has been steadier. Imports grew by 11.8% from January 2021 to January 2022, then were up another 3.2% to January 2023. The end of the year marked a weakening from a high of 107.1 in September 2022.

There are at least three lessons to be drawn from this flurry of numbers and jagged lines:

1. As noted, January was an up-month across all the major import categories. This shouldn’t have anything to do with holiday effects if seasonal adjustment is to be trusted.
2. Given the amount of month-to-month volatility, we shouldn’t put too much stock in a monthly move.
3. There is no single story that characterizes pandemic-era trade behavior. Check out our Trade Activity Forecast at the end of the week for our estimates of what comes next.

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Economic Developments

The U.S. economy added 311K jobs in February, although the unemployment rate rose slightly to 3.6%. That combination reflects a labor force increase of 419K, following an 866K increase in January. The prime age (25 - 54 years old) employment-to-population ratio rose to 80.5, returning to the level last seen in February 2020 and up from the pandemic-era trough of 69.6 it hit in April of that year.

In a busy week for GDP releases among major economies:

– The UK expanded by 0.3% month-on-month and in real terms in January, driven mainly by services, which rebounded from a 0.8% downturn in December to grow by 0.5%. Within services, transportation and storage, along with education, made the largest contributions.

– Japan’s real seasonally-adjusted Q4 GDP was revised downward to 0.1% on an annualized basis, quarter-on-quarter, from the initial estimate of 0.6% issued in mid-February. While the contribution of exports of goods and services was revised slightly upwards, almost all other components of GDP were adjusted down, including private demand, a decades-long problem for the economy.

– The Euro area did not grow in Q4 2022, according to the latest quarter-on-quarter, seasonally adjusted GDP figures. It had grown by 0.4% in the previous quarter. Year-on-year, the area did grow by +1.8%. Household final consumption was a drag on the Q4 results, falling by -0.4%.

Meanwhile, retail trade in the Euro area increased 0.3% in January from December, but was down -2.3% compared to the previous year, per the calendar adjusted retail sales index. Belgium (-8.9%) and Germany (-6.8%) saw the largest yearly decreases in sales.

China’s latest trade figures for January and February, combined to account for Lunar New Year, showed exports at $506.3 billion, a -6.8% drop from the same two-month period last year. By the same measure, imports were down -10.2% to $389.4 billion. Notably, exports of ‘high-tech products,’ which includes LCD panels and semiconductors, fell by -18.7% in value terms.

The section 232 tariffs levied on U.S. aluminum and steel imports in 2018 have not had their intended impact, according to new research, and industry output remains more or less unchanged from 2017. Looking at five measures – domestic capacity utilization, demand, output and employment, as well as trade – the data show that all are either at the average for the five years preceding the tariffs or below.

Political Developments

U.S. regulators backstopped uninsured deposits at two banks after taking control of Silicon Valley Bank (SVB) on Friday and Signature Bank of New York over the weekend. Both were designated as systemic risks to the financial system, enabling the actions. Regulators reiterated on Sunday that “no losses would be borne by taxpayers” for either action. The auction for SVB has so far failed to find a buyer.

The Biden Administration released its FY 2024 budget on March 9th. A non-partisan think tank highlighted a number of concerning issues, not least that the national debt would rise from 98% of GDP by the end of 2023 to 106% by 2027 and that interest payments on the debt would rise to $10.2 trillion, larger than spending on defense or Medicaid. The actual cost of servicing the debt, however, will be heavily dependent on the course of interest rates over coming years.

President Biden and EU President van der Leyen met in Washington for talks on a range of economic policy issues, particularly clean energy subsidies provided for under the Inflation Reduction Act (IRA) in the U.S. and the Green Deal Industrial Plan, the EU’s equivalent. They also announced upcoming trade negotiations focused on critical raw materials, an agreement on which could have the dual-benefit of easing tensions over electric vehicles while fitting with both sides’ developing policies to restructure strategic supply chains.

Disclaimer: The contents of this report are made available for informational purposes only and should not be relied upon for any legal, business, or financial decisions. Flexport does not guarantee, represent, or warrant any of the contents of this report because they are based on our current beliefs, expectations, and assumptions, about which there can be no assurance due to various anticipated and unanticipated events that may occur. This report has been prepared to the best of our knowledge and research; however, the information presented herein may not reflect the most current regulatory or industry developments. Neither Flexport nor its advisors or affiliates shall be liable for any losses that arise in any way due to the reliance on the contents contained in this report.