More Positive Numbers In Trade

US exports grew by 5.6% year-over-year (NSA) in December, the fourth gain in the past five months. It was the highest growth rate since October 2013. On the incoming trade side, imports advanced 2.4% year-over-year after rising 5.1% in November. Those were the first consecutive monthly increases since the last two months of 2014. The trade figures add further evidence that having skipped recession to start 2016 the global economy has now moved past that specific danger.

In other words, we have cycled beyond slow and steady contraction, one that lasted about two years (and more in some places) but back only into slow and steady positive numbers. Neither of those conditions equate to actual, meaningful economic growth in large part because the latter never makes up for the former.

The seasonally-adjusted series suggests a somewhat sharper pickup in US imports in the last two months of last year. Given wholesale inventory data, as well as estimates for the same in the GDP figures for Q4, that would seem to suggest restocking as the primary marginal culprit.

Excluding the import of petroleum, which has retraced only somewhat in 2016, it does appear as if there is a strong correlation between inventory and US import activity (as has been the case, and would be expected to further be the case).

Both the export and import data would also be consistent with rising sentiment indicators, including PMI’s both here and elsewhere. Questions remain, however, as to a possible “sentiment premium” where these surveys are unable to distinguish between lack of further contraction and sustainable recovery. The latter is what is usually believed the case at these times when in fact, as we experienced just three and four years ago, it was instead the former.