Trade deficit widens as exports increase, but imports rise even more

The trade deficit widened to $42.3 billion in May from $40.3 billion in April. Real exports rose by 2.3% (up 16.3% at an annual rate over the last three months), while real imports gained 2.9% (up 20.3% at an annual rate over the last three months).

Export growth to Europe, China, Japan, Canada and Mexico picked up in May.


Trade is not a zero sum game and the strong increases in both export and import volumes are far more important as a sign of continued growth at home and abroad than the widening of the trade gap (which represents a ‘drag’ on second-quarter GDP growth of about 1% point). For example, real capital goods imports increased by 5.2% in May following a gain of 4.5% in April—this is a sign that investment spending is stronger than we thought. Indeed, over the three months ended May, capital goods imports have risen 57.1% at an annual rate, capital goods exports are up 34.4%, while shipments of nondefense capital goods have risen 12.7%. U.S. exports to every region of the world are rising at rates close to 30% (with the exception of the EU, where exports are up only 8.2% on a year-over-year basis). It seems to us that the expansion of world trade has robust momentum (a view that appears to be supported in June by data on Chinese and Brazilian exports).


Popular posts from this blog

October retail sales come in strong, especially auto sales

Tea Party Buffalo Pictures

How to spot a fake Tea Partier