I’m confused by Jeffrey Snider’s post on decoupling.  He starts by talking about what decoupling is:

The word decoupling has made a comeback in recent months. In 2008, it was believed that the world would be able to withstand a slowdown in US growth, as global markets would “decouple” from the primacy of US consumers.

Then he discussed what that would mean for the US economy:

The current incarnation seeks to solve the “mystery” as to why the US seems relatively robust in the face of obvious slowdowns elsewhere – most notably and dangerously with China. In a bit of a reversal, the US is thought decoupled and isolated from emerging markets turmoil (which includes both economy and finance). Even in a very basic sense of global trade and the supply chain, that could only be the case if there was a durable and evident internal change within the US. In other words, that would mean a total reversal of offshoring.

So, decoupling is when the US economy grows less interconnected with the economies of other countries.  That is, we would see a reduction in imports, and maybe exports as well, as the US economy looks inward for production of goods and services.

Mr. Snider’s thesis is that this is not occurring, and he has a series of charts describing US import levels, as well as charts showing the progress of several factors that presumably would affect imports.  These charts show that despite trends in these factors that would normally be presumed to increase imports, that imports have in fact been declining during this time.  He then concludes that the US is just doing poorly, and not decoupling.

This data simply confirms all sides of the global trade contraction. There is no growing US demand for imported goods despite every orthodox measure to make it so. Further, that lack of US demand is eroding the supply chain as it wraps in various manners around the globe. There is no decoupling because there is no American economic acceleration.

I’m confused.  Wouldn’t the relevant data be GDP, rather than total imports?  If the US was, in fact, decoupling, wouldn’t these charts be exactly what you would expect to see?  That is, weak imports despite all efforts to the contrary?  GDP = C + I + G + NX  So if you have strong GDP with weak imports, then that might imply some decoupling.  Here, Mr. Snider is saying if you have a climate to encourage strengthening imports, and you have weak imports, then you have no decoupling, you just have a weak economy.

I think he is correct, that there is not much decoupling going on, but I would use a graph more like this to prove it:

If you see the imports going way down below the GDP trend line and staying there, then that’s decoupling.

Comments/corrections appreciated.


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