U.S. Trade Deficit Down as Imports Plunge

The U.S. trade deficit fell in May to its lowest monthly level since November 1999, as exports registered a small gain but imports dropped for the tenth month in a row.

The Commerce Department said July 10 that the May deficit was $26 billion, down 9.8 percent from a downwardly revised $28.79 billion April, and the lowest monthly figure in nearly a decade. Economists had expected the deficit to increase to $30.2 billion in May.

Although U.S. economists and business groups have long been hoping for a reduction in the U.S. trade deficit, the recent decline is more the result of weak U.S. imports than strong U.S. exports. Imports of goods and services in May dropped 0.6 percent to $149.3 billion, the tenth consecutive monthly decline. Imports in May were 34.9 percent lower in dollar terms than last July, when they registered an all-time high. A key factor was the 3.4 percent drop in the value of petroleum imports to $17.4 billion. Although volumes decreased, the average price of an imported barrel of crude oil rose to $51.21, from $46.60 in April.

On the positive side, overall U.S. exports of goods and services rose by 1.6 percent to $123.3 billion in May, compared with April, because of increased sales of soybeans, corn and other farm products, as well as higher exports of industrial machinery, generators and computers. However, U.S. exports in May were still 25 percent below the record-high set in July 2008.

The April to May increase in exports of goods reflected increases in industrial supplies and materials ($2.1 billion); foods, feeds, and beverages ($0.3 billion); consumer goods ($0.2 billion); and capital goods ($0.1 billion). A decrease occurred in automotive vehicles, parts, and engines ($0.4 billion). Other goods were virtually unchanged. The April to May decrease in imports of goods reflected decreases in industrial supplies and materials ($0.7 billion); automotive vehicles, parts, and engines ($0.2 billion); and consumer goods ($0.1 billion). Increases occurred in capital goods ($0.3 billion); other goods ($0.2 billion); and foods, feeds, and beverages ($0.1 billion).

The U.S. trade deficit with China rose 4.4 percent to $17.5 billion in May, but was still 12.6 percent below last year’s record high, reflecting weakness in demand for many imports from China. The U.S. trade deficit with Canada, its largest trading partner, dropped to $628 million, the smallest deficit in 15 years. The deficit with Japan shrank to $1.9 billion, the lowest deficit with that country in more than two decades.

Contact Alan Field at afield@joc.com.