The State of the Global Economy and Profitable Trading Opportunities

In July 2016, imports to the US dropped to $225.8 billion, or 0.8%, compared to June 2016. The growth in imports in June was 1.9%. As the world's second largest importing country, US demand for foreign goods has a sizeable impact on the export potential of emerging market economies. The decline in imports was reported at $1.9 billion, for a total July figure of $184.4 billion. The biggest declines came from pharmaceutical preparations at $1 billion, household goods and cellular phones at $-0.6 billion, and civilian aircraft at $-0.9 billion. There was an increase of $0.1 billion in inbound shipments of services. The vast majority of imported goods into the US fall into the following categories: beverages, feeds and foods at 5%, automotive components at 15%, industrial supplies at 24%, consumer goods at 26%, and capital goods 29%.

The bulk of imports to the US come from the following countries: Germany at 5%, Japan at 6%, Mexico at 12%, Canada at 14.5%, and China at 19%. On 5 October 2016, import data from August will be released and the forecast is $228 billion. Import values have been declining since June 2016 when they were reported at $227.66 billion. The forecast for August import data is $228 billion. Overall, the US economy has been holding steady with a GDP growth rate of 1.1%, an unemployment rate of 4.9%, an inflation rate of 1.1%, and an interest rate of 0.5%. The decline in imports is significant in that it will affect trade with emerging market economies. As the world's second-largest importer, the US drives global economic activity. It is notable to point out that imports of manufactured goods from China have been declining since March 2016 (in value terms) and when it comes to overall volume, they have been declining since April 2016.

Greenback Strength Fails to Halt Decline in Imports

The US import data is somewhat surprising given that the USD has been stronger of late and the US economic recovery has been robust. The decline in US imports from EM economies has been particularly strong since the start of 2013. The IMF (International Monetary Fund) attributed the import declines to plunging commodity prices and a rampant USD. Emerging market exporters are now realising that demand from developed markets is declining and that future growth prospects will have to come from other sources. Trade in emerging market economies may be impacted by declines in the US manufacturing sector. A paradigm shift has been taking place in the financial markets recently in the sense that the service sector has outstripped goods demand since 2015.