Manufacturing Revival Amidst Near Record Real Low Trade Deficits

“Many economists are racing to declare a ‘manufacturing revival.’  The latest to join the bandwagon is Paul Krugman. In his latest column, Krugman writes (my emphasis added)

Manufacturing is one of the bright spots of a generally disappointing recovery…..Crucially, the manufacturing trade deficit seems to be coming down. At this point, it’s only about half as large as a share of G.D.P. as it was at the peak of the housing bubble, and further improvements are in the pipeline…one piece of good news is that Americans are, once again, starting to actually make things.

Oh, how I wish Paul was right.  Unfortunately,  I still don’t see it in the trade numbers. In fact, the real trade deficits in capital and consumer goods are both nearing all-time (negative) records. Meanwhile, the real trade deficit for industrial supplies and materials has improved in large part because of an enormous surge in real exports of energy products, including coal, fuel oil, and other petroleum products (yes you read that right) and a sharp decline in imports of building materials. I don’t find either of these convincing proof of a resurgence of manufacturing….”

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