Trade Activity Forecast February Drop Followed by a Slight Recovery

Flexport’s Trade Activity Forecast augments traditional economic techniques for predicting U.S. merchandise imports and exports with Flexport’s proprietary data. In the latest update we maintain our outlook for imports to continue dropping, with a 6% fall month-on-month in February on a real (i.e. inflation adjusted), balance of payments, seasonally adjusted basis. However, they end the current forecast period down only 1.2% after a recovery in June and July, the two months furthest out. Export growth will be mostly flat until June and July and then will reach 2.4% above January.

The Methodology: The Flexport Trade Activity Forecast combines traditional economic statistics alongside Flexport’s proprietary data and analysis to generate a forecast of US merchandise import and export trade growth. The use of additional data has been particularly important since the advent of the pandemic and resulting shift in trade patterns away from historic averages. See our primer report for more details.

Update March 17, 2023: The central version of Flexport’s Trade Activity Forecast presented here is a balance of payments version with seasonal adjustment (BOPSA) and correction for inflation. This best answers the question of whether this sector of the economy is performing better or worse than one would expect for a given time of year. The website also offers a Census, non-seasonally adjusted version better suited for users looking for a guide to activity within supply chains on a short-term basis. When adjusting for inflation, this captures the unadulterated forecast of how many goods are expected to cross U.S. borders compared to a year earlier.

Fig. 1 - Imports to See Small Decline Again

Figure 1 shows both real and nominal values for imports and exports, dating back to the start of 2019. The nominal (dotted) figures mostly serve to illustrate how misleading unadjusted numbers can be. We’ll focus here on the real (solid) values).

Month-on-month, imports are forecast to fall 6.0% on a real, seasonally-adjusted basis in February, albeit without the effect of the Lunar New Year factored in. By the end of the current forecast period in July, imports will be down 1.2% from their actual January levels. . Exports will rise 2.4% from January by the same measure..

The implied negative net export balance (aka merchandise trade deficit) is now expected to be $243.8 billion in Q1’23, up from $208.6 billion in the previous forecast.

Fig. 2 - Auto imports continue their ascent

U.S. imports (the dark, thick line in Fig. 2) are forecast to rebound after the February drop but still remain 1.2% below January by the end of July. The apparently stable path ahead for overall imports conceals substantial turbulence within the major sub-categories. Although these categories vary a great deal in terms of volume of trade, the figures are re-based so that the average value of the year before the start of the graph - February 21 - January 22, in this case – is set to 100.

The forecast calls for consumer goods imports to be down 3.2% from January through July, a larger decline than our previous forecast. Automotive imports continue growing, rising by 2.3% over January, with the increases coming in June and July. Imports of industrial supplies and food, feed and beverages are projected to fall 2.3% and 2.8%, respectively, over the period.

Fig. 3 - Food Exports Lag

Figure 3 conducts the same exercise for exports, looking at percentage changes from the base year average (February 21 - January 22). The volatility in food exports is forecast to subside for the first four months of the forecast period, but then drop 2.7% in July compared to January. They will continue to be well-below the base period. Exports of industrial supplies, meanwhile, will see an upswing at the end of the period after a similar series of small changes. They are 3.3% larger than January.

The US Census Bureau will publish February data on April 5, 2023. Data for March will be released on May 4, 2023. The next update of the Flexport Trade Activity Forecast is scheduled for April 14, 2023.

Please direct questions about the Flexport TAF to economics@flexport.com.

Disclaimer: The contents of this report are made available for informational purposes only and should not be relied upon for any legal, business, or financial decisions. Flexport does not guarantee, represent, or warrant any of the contents of this report because they are based on our current beliefs, expectations, and assumptions, about which there can be no assurance due to various anticipated and unanticipated events that may occur. This report has been prepared to the best of our knowledge and research; however, the information presented herein may not reflect the most current regulatory or industry developments. Neither Flexport nor its advisors or affiliates shall be liable for any losses that arise in any way due to the reliance on the contents contained in this report.

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