by Mish

The nation’s trade gap came in very near expectations in May, at $46.5 billion vs Econoday’s consensus for $46.2 billion and under April’s $47.6 billion. Exports rose a constructive 0.4 percent in the month to $192.0 billion while, in another positive for the deficit, imports edged 0.1 percent lower to $238.5 billion.

The strength in exports is centered once again in services where the surplus rose 1.0 percent to $64.8 billion. Demand for U.S. services is tied to the nation’s technical and managerial skills. Exports of goods also rose, up 0.2 percent to $127.2 billion and reflecting a welcome $0.9 billion jump in consumer goods to $16.7 billion. Auto exports were also strong, up $0.6 billion to $13.2 billion.

Demand for imports is centered in capital goods, up $1.3 billion in the month to $52.8 billion which, in this case, is positive for the U.S. economy pointing to increased domestic investment in future output improvements and productivity. Crude oil imports, always a negative in the trade data, rose $0.5 billion to a monthly $11.8 billion.

By country, the nation’s trade gap with China widened to $31.6 billion in May from April’s $27.6 billion with Mexico also showing a large increase to $7.3 billion from $6.3 billion (note that country data, unlike other data in this report, are unadjusted for seasonal and calendar variations).

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The nation’s trade imbalance is running about even with earlier in the year pointing, with June data still to go, to little effect for second-quarter GDP.

Balance of Trade vs. First Quarter

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Compared to the first quarter, the trade deficit is running slightly higher on average. With one month left to go, net exports rate to subtract a bit from second quarter GDP (-0.2 to -0.5 percentage points). To pick a specific number, call it -0.35.

Mike “Mish” Shedlock

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