Best Financial Markets Analysis Article The trade gap of the U.S. economy was virtually unchanged at $45.6 billion in August. Exports of goods and services held steady in August, while imports of goods and services also were almost unchanged. The real trade deficit of goods widened to $47 billion from $46 billion in July, reflecting a drop in exports of goods (-0.7%) and a 0.2% increase in imports of goods. From a year ago, exports of goods rose 6.7% and imports of goods moved up 1.9% (see Chart 5).

The main message from Chart 5 is that tepid growth in the United States has held back imports compared with the situation in August 2010 and slowing conditions in Europe combined with non-Japan Asia trying to rein in inflation has resulted in only a moderate increase in exports from a year ago (see Chart 5).

The export and import numbers of China are equally telling about underlying fundamentals in China and its major trading partners. Exports and imports of China grew at a double-digit pace in September (see Chart 6). But, there is a visible deceleration in place now; exports of goods increased 17.1% in September 2011 vs.+25% in September 2010, reflecting weakening demand from abroad and a stronger currency. Exports of China to the US, EU, and Asia &the Middle East, the three major export destinations of China, show a slowing trend (see Chart 7), with the US and EU showing a larger deceleration compared with Asia and the Middle East. Goods imports of China grew 20.9% from a year ago compared with a nearly 39% jump in 2010 (see Chart 6), implying that economic momentum of China is also slowing.

Asha Bangalore — Senior Vice President and Economist

http://www.northerntrust.com

Asha Bangalore is Vice President and Economist at The Northern Trust Company, Chicago. Prior to joining the bank in 1994, she was Consultant to savings and loan institutions and commercial banks at Financial & Economic Strategies Corporation, Chicago.

The opinions expressed herein are those of the author and do not necessarily represent the views of The Northern Trust Company. The Northern Trust Company does not warrant the accuracy or completeness of information contained herein, such information is subject to change and is not intended to influence your investment decisions.

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