May’s trade deficit at $41.1 billion came in by more than the expected reading of a $40.0 billion deficit. This was the result of a 1.6% rise in imports against a 0.2% decrease in exports. Annually, the change in exports is now 4.2% lower, while imports were 3.1% lower. Meanwhile, the nonpetroleum deficit jumped to $58.2 billion in May from $54.4 billion in April. The non–seasonally-adjusted volume of oil imports was much lower in May at 223.4 million barrels after 230.7 million in April. There was also another large increase in the unit price of imported crude oil of 16.0% in May (largest since February 2015) after a 6.5% rise in April. Total petroleum exports increased by 14.5% in the month.
Beneath the headline figures, the bulk of this month’s increase in goods exports was largely the result of a $0.8 billion fall in exports of capital goods (largely civilian aircraft $0.4 billion and computer accessories $0.3 billion) and automotive parts and vehicles ($0.3 billion). The $3.3 billion increase in goods imports, meanwhile, reflected an increase in industrial supplies and materials ($2.3 billion), consumer goods ($1.3 billion), and capital goods ($0.9 billion).
The deficit through the end of the first quarter and into the start of the second was substantially improved as the dollar started to ease in strength and import demand plummeted. This led to the positive contribution of 0.12 percentage points from net exports, following negative contributions through the previous two quarters. With regard to energy, demand is starting to improve in terms of volume, though the value of energy imports (impacted by pricing) was still falling. This is further evidence that the current economic recovery is still underway and improving. Looking forward, with the dollar once again heading upward, and global demand still soggy, the result is likely to be further downward pressure on GDP from the trade component.
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Richard de Chazal, CFA is a London-based macroeconomist covering the U.S. economy and financial markets.