If it makes you feel better

May 21, 2008
The U.S. trade deficit fell by $3.5 billion, or 5.7%, from February to March this year, and it now totals at $58.2 billion. This is the amount by which U.S. net imports exceed our net exports, and it’s considered to be good news because the March ...

The U.S. trade deficit fell by $3.5 billion, or 5.7%, from February to March this year, and it now totals at $58.2 billion. This is the amount by which U.S. net imports exceed our net exports, and it’s considered to be good news because the March figure reverts to a trend begun last year when the trade deficit started falling after years of steady increases. That trend started when the value of the U.S. dollar began to decline.

This would be even better news if the trade-deficit trends were infuenced more by U.S. exports, though there is also some brightening on that front. Compared with March 2007 U.S. net exports, the current figure is up 15.5%. Imports in March were up, too, incidentally, by 7.9%. That’s a figure to ponder, because if you consider how much more you paid in fuel and food costs in recent weeks (and then realize that everyone else felt a similar squeeze), you’ll wonder why that number isn’t higher.

It isn’t higher because domestic spending is just limping along. Purchases by the manufacturing segment of the economy are below the break-even level, reports the Institute for Supply Management, and U.S. consumer spending rose only 0.1% in March, after factoring for inflation (see fuel, food). That’s fine, but it’s hard to be encouraged by a declining trade deficit when its effects bring so little assurance. We’re producing more efficiently (U.S. Dept. of Labor statistics say domestic productivity rose 2.2% in the first quarter), so that’s another boon to the economy, but the inescapable message is that with our currency devalued we can’t buy as much as we used to buy.

For years, we’ve been scolded by economists that the trade deficit would be our national undoing, and last summer and fall as the dollar declined we were counseled to expect improvements in U.S. industrial activity: imported goods declining, exports increasing.

Some of this “good news” shows up in the American Foundry Society’s latest Metalcasting Forecast & Trends report, an annual presentation of industry economic statistics. The report finds that the rate of U.S. cast-metal imports is declining (from 7% of sales in 2007 to a forecast 5%, or 3.68 million tons in 2008), and productivity indicators are improving. The domestic market’s resort to imported castings is declining for several reasons, the report finds, including rising offshore production costs and domestic demand in large-volume producer countries (i.e., China and India.)

“U.S. sales of metal castings are expected to increase 5.4% to $34 billion in 2008 from $32.4 billion in 2007, with output rising 3.7% to 13.8 million tons in 2008,” AFS explains. It also detects “a continuing shift in the types of cast materials (being sold), with gains forecast for ductile iron, magnesium, and aluminum, while steel and gray iron shipments will decline.”

I’ll take positive news however it comes, and if these forecast figures prove true they will be good news indeed for U.S. metalcasters — higher domestic market share, stronger revenues, a better competitive standing versus foreign competition. However, what it indicates mostly is that castings produced domestically are more attractive because our devalued currency makes foreign-sourced castings cost more.

For metalcasters to do well, their customers also must do well, so that they will buy more castings, not just replace their suppliers. More cars and trucks have to be sold; more homes and buildings have to be built, and furnished; infrastructure projects have to started; and so on. Manufacturing and consumer data doesn’t show much of that, so the positive effect of a devalued currency has to be reconsidered. A better market share is a good thing: a stronger market would be even better.

About the Author

Robert Brooks | Content Director

Robert Brooks has been a business-to-business reporter, writer, editor, and columnist for more than 20 years, specializing in the primary metal and basic manufacturing industries. His work has covered a wide range of topics, including process technology, resource development, material selection, product design, workforce development, and industrial market strategies, among others. Currently, he specializes in subjects related to metal component and product design, development, and manufacturing — including castings, forgings, machined parts, and fabrications.

Brooks is a graduate of Kenyon College (B.A. English, Political Science) and Emory University (M.A. English.)