Weak Demand Remains throughout U.S. Despite Factory Orders Increase

A surprising jump in factory orders may reverse a decline in U.S. exports, but weak demand remains throughout America and the world.

The trade balance deficit between America and the rest of the world fell 14%, due largely to a major decline in exports, which fell nearly 1% from February, as foreign markets continue to struggle with a strong dollar, low commodity prices, and stagnating growth. Meanwhile, cash-strapped Americans are buying fewer foreign-made goods, as imports fell 3.6% from the prior month.

A surprising jump in factory orders may reverse a decline in U.S. exports, but weak demand remains throughout America and the world.

The trade balance deficit between America and the rest of the world fell 14%, due largely to a major decline in exports, which fell nearly 1% from February, as foreign markets continue to struggle with a strong dollar, low commodity prices, and stagnating growth. Meanwhile, cash-strapped Americans are buying fewer foreign-made goods, as imports fell 3.6% from the prior month.

For 2016, the trade deficit has fallen 0.8% so far on a year-over-year basis as exports fell 5.4% and imports fell 4.5%.

The continued decline in both demonstrates weak demand from average consumers around the world—a protracted economic problem described by some economists as “secular stagnation.” Those economists believe continued weak demand will pressure economic growth for a long time to come.

Factory Order Relief

While trade is falling, factory orders posted a surprising increase. According to the Census Bureau, new orders for manufactured goods rose 1.1% in March, above expectations of a 0.6% increase. This comes after a 1.9% decrease in February, however, meaning orders remain down year-to-date.

Shipments and inventories also posted gains, with shipments reversing the trend from a decline over the last eight months to a sudden 0.5% increase to $464.7 billion.

Monetary Controversies

The proper policy response to this stubborn, slow growth continues to be a controversial topic among investors and business figures, although most economists have conceded that quantitative easing from central banks may be the best way to stimulate growth.

Most recently, bond fund manager Bill Gross has conceded the usefulness of quantitative easing to combat slow growth despite famously and loudly criticizing easy monetary policy. “Private banks can fail but a central bank that can print money acceptable to global commerce cannot,” he wrote in his most recent investment outlook, adding that he expects further accommodative monetary policies from central banks around the world.

“I believe that for now central banks will print more helicopter money via QE (perhaps even the U.S. in a year or so) and reluctantly accept their increasingly dependent role in fiscal policy,” he said, adding that the money could be spent “on infrastructure, health care, and introduce Universal Basic Income for displaced workers amongst other increasing needs.”