Some observers are dubious, but economist Daniel E. Laufenberg of American Express Financial Advisors Inc. in Minneapolis thinks the sharp export-led drop in the U.S. trade deficit in August suggests a turning point in trade is near. The catalyst: growing U.S. capital goods exports combined with slowing U.S. equipment imports.
Despite lower demand in Latin America, U.S. capital goods exports to emerging nations are running 25% over last year's pace. And, aided by a weak dollar and America's high-tech prowess, capital goods exports are also up 15% to 24% in such weak industrial economies as Japan, Canada, and Germany.
Meanwhile, capital spending in the U.S. appears to be slowing significantly. In recent years, America's appetite for equipment imports has escalated in the wake of booming capital outlays coupled with tight domestic capacity. Now, as capital investment slows, says Laufenberg, "capital goods imports, which account for some 35% of total U.S. imports, are likely to stumble as well."
Other hopeful developments include signs that the U.S.-Mexican trade balance has stopped deteriorating, and a decline in motor vehicle imports, which should accelerate when a sharp drop in Japan's auto exports in September gets reflected in U.S. trade data.
The outlook, then, seems to favor at least a modest turnaround in America's trade position over the next six months--and a substantial improvement once Latin America joins Asia on a fast growth track. Already, note economists Donald H. Straszheim and John Praveen of Merrill Lynch & Co., some 45% of U.S. capital goods exports go to emerging nations. And with many Asian nations now facing infrastructure bottlenecks, sales of both traditional and high-tech U.S. capital goods are accelerating.