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(photo credit: )
Against the noisy background of the Middle East plunging into the most serious military clashes in decades - and the inevitable negative impact these are having on financial markets both near and far from the action - it is easy to miss some developments that, while less dramatic, may well prove more important in the long run.
The roar of the cannon and the sonic booms in the skies inevitably attract much more attention than dry numbers, especially if these are as arcane as the US trade data. To then say that the latest set of numbers on American trade were significant because they weren't as bad as had been expected, adds confusion to disinterest.
What can be significant here? The global economy has, anyway, become inured to the US trade deficit steadily widening. The argument about whether this trend portends an imminent crisis or doesn't actually matter very much, has rumbled on for years - with the non-appearance of the promised crisis providing strong support for the "doesn't much matter" camp.
So what's the big deal if the announcement on Wednesday that the trade deficit for May widened by less than one percent, to almost $64 billion, triggered very positive reactions from analysts - including one assessment that "this is an incredibly benign result"? Not only does it sound rather weird to term "incredibly benign" a monthly deficit that not long ago would have been considered horrendous, but, even if it is good news of some sort, why is it especially noteworthy?
The answer lies in the caveat that is typically attached to any analysis of one month's figures, which says something like "of course, these are only one month's data so it would be rash to draw far-reaching conclusions from them." If, however, the data of a single month fit in with a picture that has emerged over several months, then drawing conclusions is more legitimate.
That seems to be the case with the US trade data, in which a pattern can be discerned stretching back several months. This pattern is one of moderation - the trade deficit is no longer racing upwards, the data from a month or two back are usually adjusted downwards (to show a smaller deficit than originally reported) and, most critically, the trend of American exports is strongly upward, while the upward trend of US imports is noticeably (although by no means dramatically) moderating.
What this indicates is that the US economy is slowing - a finding that is confirmed by most recent economic data - and that foreign economies (notably Europe and Japan) are speeding up.
The reason these positive trends are not actually reducing the overall US trade deficit is because the oil deficit is still swelling. But if, as suggested here a few weeks ago, the trend in oil prices is also moderating (the very mild rises in price over the last few days support this idea), then the outlook for the US trade deficit is indeed changing - from relentless rises almost every month to small rises and then to some reduction in the size of the monthly deficit. How much the deficit might shrink depends on how long the new trends hold sway and how powerful they prove to be, but their basic existence seems fairly clear.
The price of oil and the expanding US trade deficit are medium-term trends that seem to be changing. But there are other trends afoot that involve much longer-term trends. For instance, it is now pretty certain that the Doha round is dead - and with it, in the view of many analysts, the credibility and effective functioning of the World Trade Organization. If so, the implications for world trade and economic growth over the long-term are severe and we should be on the look-out for the upsurge in protectionist sentiment in developed economies, especially the US, to become much stronger.
Finally, the most amazing statements of the week came not from Jerusalem or Beirut, but from Tokyo. There, in response to the North Korean missile firings, the Japanese foreign minister and likely next premier, said that Japan must consider whether the constraints imposed on its armed forces by its postwar constitution, which limits the country to "self-defense" activities, prevent Japan from launching preemptive attacks on North Korean missile sites. That's in addition to the growing groundswell of support for Japan to develop its own nuclear weapons, in the face of the North Korean and Chinese threats.
In the frenetic Middle East, trends change with the frequency of traffic lights - in the Far East, things move much slower. But the basic rule is that everywhere, in every sphere of activity, all trends change eventually.