Though December’s trade numbers seemed to show steady growth in real terms, 2022 was a year of wild swings from month to month and category to category. Zooming out, we see that imports remain above their pre-pandemic trend, while exports have yet to regain their trend line.

In Focus - A Decade of Trade

With the just-released data for December, we can close the books on the full year of U.S. trade 2022. The verdict? The closer you look, the more tumultuous it appears.

On the surface, it was tranquil. After adjusting for inflation (i.e. in “real” terms) goods imports were 6.5% higher in 2022 than 2021 and exports were up 5.9%. Comparing December to November, goods imports were up 2.0% while exports rose 1.6%.

So where is the tumult? Evident right beneath. If we look by major category – and use monthly figures rather than annual – the strongest sector was automotive, which grew by 11.0% year-over-year. The weakest: industrial supplies, a category heavily influenced by petroleum products. It grew by just 1.8%. For exports, consumer goods were up 8.4%, while foods, feeds & beverages were down 4.4%.

As for swings across months in these seasonally-adjusted numbers, the peak for goods imports was March. From then, they fell 12.0% to November before a slight rebound at year’s end.

The trend for exports was entirely different. The nadir was in February and the peak in August, when they were up 11.2%. Some of the individual category monthly moves were even more dramatic – the volatility prize goes to consumer goods imports, which fell 27.4% from a March peak to a November trough.

The chart zooms out to look at a decade of US goods trade and tries to gain some perspective on the effect of the pandemic era, now three years in. While the solid lines in the graph show imports and exports for January 2013 through December 2022, the dotted curves are essentially trend lines, fitted to data only up through December 2019 – a date meant to approximate the eve of the pandemic.

The purpose of these curves is to pose a counterfactual: What might an observer have projected for the ensuing era had there been no pandemic-related disruptions? Of course, the initial onset of the pandemic meant steep drops in both imports and exports. Then, there was the remarkably rapid rebound in imports. Unlike exports, however, they not only regained the trend line, but shot past it by late 2020 and were far above by the spring of 2021. Export performance is generally driven by the health of other economies around the world – in this era somewhat weak.

This is a leading reason why the supply chain crunch was so intense. Nothing in the years leading up to the pandemic would have foretold the volume of imports that ships had to carry, ports process, and trains and trucks distribute. And, as a number of logistics businesses are currently experiencing, if one builds for peak demand, the return to more normal levels can be distinctly painful.

So what comes next? Watch for the latest update of Flexport’s Trade Activity Forecast at the end of the week.

You can now receive the Weekly Economic Report straight to your inbox every Monday by signing up here.

Latest Flexport Metrics & Research

The Flexport Ocean Timeliness Indicator shows Transpacific Eastbound (TPEB) routes decreased and Far East Westbound (FEWB) routes increased. TPEB dropped to 67 days from 68 days and the FEWB increased to 76 days from 73 days.

Flexport’s Air Timeliness Indicator meanwhile shows the TPEB decreased and the FEWB increased. The TPEB decreased to 8.3 days from 9.2 days while the FEWB increased to 12.0 days from 10.9 days.

We take a preliminary look for evidence of nearshoring in North America, using the latest US trade data. The share of Canada and Mexico in the nominal value of total imports has remained more or less unchanged over the past five years.

Economic Developments

In a rare outcome, the UK economy neither grew nor shrank in the last quarter of 2022.

Japan reported a current account balance of just $255.5 million for 2022. A combination of rising, dollar-denominated commodity prices at a time of a weak yen is being cited as one cause.

U.S. consumers are pressing on for the moment, according to the latest University of Michigan Survey of Consumers, The survey found that inflation expectations have receded from recent highs, but remain well-above the average for the past twenty years.

U.S. wholesale inventories were up a mere 0.1% in nominal terms in December 2022, a slowdown from November, when they grew by 0.9%. Inventories are a closely-watched indicator as retailers continue to search for the correct, post-pandemic balance.

German industrial production fell 3.1% month-on-month in December, a larger decline than was expected. Energy-intensive sectors were largely to blame. As we noted last week, energy price inflation is slowing in the Euro area, but remains high as the region adjusts to the Russia sanctions.

Political Developments

Following months of speculation, the next governor of The Bank of Japan will be Kazuo Ueda. There is uncertainty around his views on monetary policy, but he is widely expected to be less dovish than his predecessor, current governor Haruhiko Kuroda.

Russia will cut oil production by 5% in response to Western sanctions and price caps. Reactions to the move were mixed. Some analysts claim it could stoke greater inflation, while others note that such a small volume shouldn’t have a meaningful impact on prices.

Economy ministers from France and Germany claimed to have received “assurances” from the U.S. about the green subsidies contained in the August 2022 Inflation Reduction Act, but offered no specifics. The EU is worried the IRA will unfairly draw investment and trade away from its member countries.

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.