Some news Tuesday morning about America's trade deficit bodes well for growth. And there may be bigger lessons about the global economy working its way toward a more sustainable balance.
The United Stated imported only $34.3 billion more in goods and services than it exported in November, down 13 percent from October. It is the lowest monthly trade deficit in more than four years. It was strong enough to lead forecasters to dramatically upgrade their expectations of how fast the U.S. economy grew in the fourth quarter. Macroeconomic Advisers, one leading firm, bumped its estimate of GDP growth to 3.5 percent, up from 2.6 percent before the trade announcement!
The big question for the future is whether this is a onetime blip in the (always-volatile) trade data, or something that will recur. Even more important, does it signal progress toward a more sustainable, balanced global economy in which the United States isn't just the buyer of last resort for all the world's goods?
The improvement in the trade balance came via a slight increase in exports ($1.7 billion) and a larger decrease in imports ($3.4 billion). Most of the decline in imports came about because of a $2.5 billion drop in the value of imported crude oil. That's not just a one-month trend. Through the first 11 months of 2013, crude oil imports were down almost $40 billion, a 13.7 percent drop. There were also large drops in other petroleum products (liquified petroleum gas imports, down $2.2 billion, other petroleum products down $1.6 billion).
So, the domestic energy boom is translating pretty clearly into a more favorable trade balance for the United States, which in turn means stronger overall growth. That may not create as many new jobs as one might hope (see an exploration of that question here). But what does it mean for the longer-term project of making a more sustainable global economic order?
The United States was running consistently large current account deficits in the years before the crisis, very likely a contributor to the imbalances that made the financial system vulnerable to the near-collapse in 2008. In short, we bought more stuff from other countries than we sold to them (particularly from Asian exporters of consumer goods and Middle Eastern oil exporters). The money those other countries made from selling us all that stuff was recycled into U.S. financial assets (think anything from the Abu Dhabi sovereign wealth fund to an Indonesian billionaire's holdings of Treasury bonds). That inflow of money into U.S. financial assets pushed interest rates down artificially and encouraged the most interest-rate-sensitive sectors of the economy, particularly housing, to get into a massive bubble.
The broadest measure of whether that kind of imbalance is still a problem is the nations' current account. And there the news is also pretty good. In the third quarter, the country's current account deficit was 2.2 percent of GDP, the lowest level since the start of 2008.
It might be better for American workers if this correction of trade deficit and financial imbalances was being fueled more by rising exports -- particularly from labor-intensive sectors-- than by falling energy imports. But the fact remains that these are positive trends toward creating a more durable global economy.
There has been a tendency to throw our hands up and say, "Everything is awful," and to assume that the world has learned nothing from the crisis of 2008. And there are surely other risks for the world economy simmering out there. But the reality is that, thanks in large part to the U.S. energy boom, one key set of imbalances behind the crisis is rapidly disappearing.