The NYT decided to turn the standard textbook economics on its head and told readers that the higher imports reported for April is good news for the economy. An article headlined, "Data readings converge to show an economy regaining momentum," told readers:
"'Rising imports are not a sign of economic weakness,' said Joshua Shapiro, chief United States economist for MFR Inc. 'To the contrary, it’s a sign of economic demand.'"
Okay, let's get out the detective hat and glasses. Imports can rise for two reasons. One is the story here from Mr. Shapiro, demand is growing rapidly. That means we are buying more of everything, including more imports. Then we have reason two, the U.S. is becoming less competitive so we are substituting imported goods for domestically produced goods. Let's go look at the evidence.
As this piece notes, exports fell by 0.2 percent in April. That one seems consistent with the declining competitiveness story. After all, if our economy is booming that should very directly boost our exports since many exports are components of products that are ultimately consumed in the United States. For example, we export many car parts to Mexico, which are then assembled into cars purchased in the United States. In this way more demand for cars here means more exports of car parts to Mexico.
Of course we don't have more than a single month's data to look at. If we compare real exports over the last three months with the prior three months they are down by an average of 1.0 percent. That certainly seems to be good evidence of the declining competitiveness story.
If we turn to real imports, there is a jump of 1.8 percent on average over the last three months. While much of this jump is attributable to the April data, even in the winter months, when we know the economy was growing slowly (if at all), imports were up over the pace in the fall. That is certainly consistent with the declining competitiveness rather than rapid growth view.
Finally, if the jump in imports in April was due to rapid growth, what was the component of domestic demand that was growing rapidly? Retail sales increased by just 0.2 percent from March's pace. Manufacturing inventories increased by a modest 0.4 percent (as compared to a 0.7 percent rise in January). And shipments of manufacturing goods increased by just 0.3 percent in April, down from 0.4 percent growth in March, and 1.0 percent in February.
In short, we seem to have a pretty good case here that the jump in imports is a story of declining U.S. competitiveness. The data refuse to cooperate with the NYT's story line.
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