I reordered the charts in the BLS report to highlight what’s important for GDP purposes.
Imports subtract from GDP while exports add to GDP. With export prices falling more, this report is decidedly net negative for second quarter GDP.
Select Import Prices
Petroleum accounts for most of the import price drop. Other pockets of weakness include automotive vehicles and consumer goods. Prices of agricultural foods feeds, and beverages rose 1.1%
Select Export Prices
Foods, feeds, and beverages account for only 8.8% of exports but that category accounts for nearly all the drop in export prices for both May and June.
US Dollar Effect
The US dollar index peaked in December of 2016 at 103.81. Today the US dollar index sits at 94.46. That’s a decline of 9 percent in 6-7 months.
A falling dollar is supposed to boost exports, making them cheaper. Charts prove that expected boost did not happen.
Balance of Trade
Balance of Trade vs. First Quarter
Compared to the first quarter, the trade deficit is running slightly higher on average.
For more details, please see Balance of Trade Deficit Near Expectations: Analyzing the Impact on Second Quarter GDP.
Mike “Mish” Shedlock