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Highlights
The U.S. trade balance in May narrowed, thanks largely to lower oil prices. Exports made a partial comeback. The trade deficit narrowed to $48.7 billion from $50.6 billion in April (originally $50.1 billion). Expectations were for a deficit of $48.7 billion. Exports rose 0.2 percent, following a 0.9 percent decline in April. Imports fell 0.7 percent after a 1.6 percent drop the prior month.
The narrowing in the trade gap was led by the petroleum goods gap which shrank sharply to $24.9 billion from $28.1 billion in April. In contrast, the non-petroleum goods deficit expanded a little to $37.9 billion in May from $36.7 billion the month before. The services surplus improved to $14.8 billion from $14.6 billion.
On a not seasonally adjusted basis, the May figures showed surpluses, in billions of dollars, with Hong Kong $2.9 ($3.3 for April), Australia $1.7 ($1.6), and Singapore $1.0 ($0.7) among others. Deficits were recorded, in billions of dollars, with China $26.0 ($24.6), OPEC $11.2 ($11.5), European Union $10.5 ($8.7), Japan $6.4 ($6.3), Mexico $6.3 ($5.4), and Germany $4.9 ($4.6) among others. While the deficit with Europe widened, the good news is that it was modest and that there is no indication of a precipitous effect on the U.S. The impact in May was relatively small.
Looking specifically at goods (Census basis), exports rose 0.3 percent, following a 1.4 percent fall in April. The May improvement in goods exports was led by a $0.9 billion gain in foods, feeds & beverages. Capital goods excluding autos rebounded $0.7 billion-and it was non-aircraft. Industrial supplies fell $0.8 billion and likely was price related. Also declining slightly were automotive and consumer goods.
Goods imports fell 0.8 percent in May after a 1.8 percent drop the prior month. The drop in goods imports in May was led by a $3.6 billion fall in industrial supplies-primarily oil. Consumer goods dipped $0.4 billion. On the plus side were capital goods excluding autos (up $1.4 billion) and automotive *up $0.7 billion).
Today's data are mildly encouraging. The smaller trade gap indicates that more U.S. income is staying in the U.S. to help boost domestic demand. Exports rebounded partially-at least indicating that exports are not in a free fall. But both exports and imports after discounting prices are on the soft side. The recent trend is that demand is less robust overall but at least still growing. Businesses appear to be back investing in equipment but businesses are cautious about consumer demand, ordering fewer consumer goods to put on store shelves.
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