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Olympics may help U.S. trade deficit set another new record

Cons. Discr. - Durables 456 Cons. Discr. - Retailing 417 Japan 572 Trade Balance 923 U.S. 5211

The United States’ trade in goods and services deficit has hit a series of record highs in 2021 including $71.2 billion in May which marked the second highest on record after the $75.1 billion recorded in March, Panjiva’s analysis of official data shows. An elevated deficit is to be expected during an economic boom. 

The trade-in-goods balance increased by 26.5% year over year and by 17.6% compared to May 2019 as the result of imports which rose by 41.0% year over year and by 5.0% versus 2019. The import expansion has been largely due to a surge in consumer goods imports, as discussed in Panjiva’s research of June 16, which has been an ongoing trend since October 2020.

The expansion in the overall trade deficit has also been exacerbated by a reduced trade-in-services surplus after imports of services – ranging from financial and maintenance services to travel and media consumption – rose by 27.1% year over year and by 9.1% compared to May 2019.

Services imports rising more rapidly than exports

Chart segments change in U.S. trade deficit between services and goods and by direction. Source: Panjiva

The Olympic Games in Tokyo, scheduled to run from July 23 to August 8, may provide an additional boost to services imports. Panjiva’s analysis shows that in the prior three Olympics imports of “Intellectual Property” which includes purchases of television rights increased by an average of $820 million in August versus July, including $1.2 billion in August 2016 versus July 2016. 

A similar phenomenon can be seen in the case of Winter Olympic games with an average $712 million increase in February compared to January including $783 million in February 2018 at the Pyeongchang Games versus January 2016. It should be noted that the figures only include media presentations of the games, not travel or merchandise which may further add to imports.

Olympics viewing rights boosts U.S. services imports

Chart shows U.S. imports of intellectual property services by Olympiad year. Source: Panjiva

It’s not clear whether there is also a “fitness dividend” in terms of increased demand sport equipment following the Olympics. Panjiva’s data shows U.S. imports of sports, fitness and cycling equipment fell by 8.0% year over year in the three months to November 2016 but increased in the same periods of 2012 and 2008.

There’s already been a marked increase in U.S. seaborne imports of sports equipment in 2021 however due to increased demand in the wake of the pandemic with growth of 65.0% year over year in Q2’21 after an expansion of 136% in Q1’21. 

There’s been a marked difference in performance in imports among different categories of importers. Among retailers imports linked to Walmart jumped 324% higher while those associated with Dick’s Sporting Goods fell by 29.5%.

Similarly in bicycles imports linked to Giant Manufacturing rose by 89.6% in Q2’21 while Kent International’s fell by 6.5%, though the latter has been restructuring its supply chain too.

Firms importing home fitness equipment meanwhile have generally done better than average, shown by a 230.2% increase in imports associated with Nautilus, while sports equipment makers such as Head saw more modest growth of 21.7%.

Not all importers are winners from surge in sports imports

Chart segments U.S. seaborne imports of sports, fitness and cycling equipment by consignee. Source: Panjiva

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