The U.S. Department of Commerce announced today that the U.S. Trade deficit of goods and services for January 2008 was $58.2 billion, up from $57.9 billion in December 2007. The trade deficit of goods with China was $20.3 billion (up from $18.8 in December); the trade deficit with OPEC was $15.5 billion (up from $12.6 in December).
The increase in imports was mostly caused by increases in oil costs. Consumer goods imports decreased by $1.7 billion reflecting weakened consumer demand. Here is a chart of the monthly trade deficit adjusted for inflation compared to the Median Household Income also adjusted for inflation. The trade deficit normally declines during recessions as household incomes decline. The pattern broke down after the 2001 recession. Incomes have increased by 0.6% from the end of the recession to the 2006. The trade deficit increased by 81.5% in that same period.
This next graph compares annual changes in personal income to the annual trade deficit. The trade deficit lags the changes in personal income. However it follows the 3 year moving average of the personal income. When income goes up over time the trade deficit has also gone up and vice versa. Up until the 2001 recession, the increases in personal income were greater than the trade deficit. However after the recession the trade deficit grew much faster than incomes did. From the beginning of the 2001 recession to now, Personal income has grown by an average of $217.8 billion a year and the trade deficit has averaged $628 billion a year. We are now borrowing from the future to fund our lifestyles of the present. Perhaps a reason for the change was the wealth effect of the surging house prices.
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The increase in imports was mostly caused by increases in oil costs. Consumer goods imports decreased by $1.7 billion reflecting weakened consumer demand. Here is a chart of the monthly trade deficit adjusted for inflation compared to the Median Household Income also adjusted for inflation. The trade deficit normally declines during recessions as household incomes decline. The pattern broke down after the 2001 recession. Incomes have increased by 0.6% from the end of the recession to the 2006. The trade deficit increased by 81.5% in that same period.
This next graph compares annual changes in personal income to the annual trade deficit. The trade deficit lags the changes in personal income. However it follows the 3 year moving average of the personal income. When income goes up over time the trade deficit has also gone up and vice versa. Up until the 2001 recession, the increases in personal income were greater than the trade deficit. However after the recession the trade deficit grew much faster than incomes did. From the beginning of the 2001 recession to now, Personal income has grown by an average of $217.8 billion a year and the trade deficit has averaged $628 billion a year. We are now borrowing from the future to fund our lifestyles of the present. Perhaps a reason for the change was the wealth effect of the surging house prices.
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