The international trade balance measures the difference between imports and exports of both tangible goods and services. Imports may act as a drag on domestic growth and they may also increase competitive pressures on domestic producers. Exports boost domestic production. Why Investors Care
| Released on 7/12/07 For May 2007 | ||||||||||||
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Highlights
The U.S. trade deficit widened in May to $60.0 billion from a revised $58.7 billion in April. The May figure matched the consensus forecast for a $60.0 billion gap. Imports rose 2.3 percent while exports advanced 2.2 percent. Most of the worsening was in petroleum but the non-petroleum deficit widened also but only incrementally.
The merchandise trade gap (Census basis) widened to $66.6 billion from a revised $64.8 billion deficit in April. The goods gap excluding petroleum grew to $42.7 billion in May from $42.4 billion the prior month.
On the import side, overall merchandise imports increased $4.0 billion in May. Gains were led by industrial supplies, up $2.4 billion; capital goods, up $1.0 billion; and consumer goods, up $0.6 billion. Automotive fell $0.5 billion.
On the export side, merchandise exports increased $2.3 billion in May. Gains were led by capital goods, up $1.9 billion, and industrial supplies, up $0.6 billion. Foods, feeds, & beverages and also automotive were down but barely.
The oil trade deficit widened in May to $23.9 billion from $22.4 billion the month before. Crude oil prices in May continued upward, rising to $59.36 per barrel from $57.28 per barrel in April.
On a bilateral basis, the goods deficit with Canada decreased from $5.8 billion in April to $5.2 billion in May. The goods deficit with China increased from $19.4 billion in April to $20.0 billion in May. The goods deficit with Mexico increased from $5.2 billion in April to $5.9 billion in May. Country balances are not seasonally adjusted.
Today's numbers are in line with expectations and should not have significant impact on the markets. However, the data do remind us of the effects on the economy of higher oil prices other than just inflation. More dollars are going overseas, slowing the economy. Given that imports for consumer goods, including autos, are not robust, it appears that businesses are expecting a moderation in consumer spending. Long lags are involved with the planning of imports compared to when they actually arrive on the docks and today's numbers could reflect views when the economy was slower. Either the consumer sector is moderating or there will be a pick up in imports soon as businesses realize they underestimated the strength of the economy. Most likely, we will see a little of both in coming months.
The U.S. international trade gap narrowed sharply in April to $58.5 billion from $62.4 billion in March. Imports fell 1.9 percent while exports edged up 0.2 percent. The import improvement was primarily outside of petroleum. Import weakness was led by declines in imports of consumer goods and autos. Imports of non-auto capital goods also declined. Markets should focus on whether the decline in non-oil imports continues. Further weakness in these imports could indicate whether businesses are expecting a softening in demand in the U.S. However, with the recent uptrend in crude oil prices, one should expect a jump in petroleum imports and a likely rise in overall imports. In turn, we may see a sharp rise in the overall trade gap.
International trade balance Consensus Forecast for May 07: -$60.0 billion
Range: -$61.5 billion to -$58.3 billion
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Exports grow when foreign economies are strong. The weaker the foreign exchange value of the dollar, the less expensive goods and services are to foreigners, and this also helps spurt export activity. Imports grow when U.S. economic growth is robust. Imports are also spurred by a strong foreign exchange value of the dollar. |
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The international trade balance has posted a deficit almost continuously since the 1980s. Any trade deficit is a drag on U.S. GDP growth, but a smaller deficit adds to growth, while a larger deficit decreases GDP growth. |
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