The 10.1% Increase in the May Trade Deficit Was Not Bad Enough to Hit GDP

Our trade deficit increased by 10.1% in May as the value of our exports decreased and the value of our imports increased.   The Census report on our international trade in goods and services for May indicated that our seasonally adjusted goods and services trade deficit rose by $3.8 billion (rounded) to $41.1 billion in May from a revised April deficit of $37.4 billion.  The value of our May exports fell by $0.3 billion to $182.4 billion on a $0.2 billion decrease to $119.8 billion in our exports of goods and a $0.1 billion decrease to $62.5 billion in our exports of services, while our imports rose $3.4 billion to $217.1 billion on a $3.4 billion increase to $182.1 billion in our imports of goods while our imports of services were virtually unchanged at $41.4 billion.  Export prices were on average 1.1% higher in May, so the real relative quantity of May exports would be lower than the nominal dollar amount by that percentage, while import prices were 1.4% higher, meaning real imports were relatively smaller than the nominal dollar values reported here by that percentage.

Most of the decrease in our May exports could be accounted for by lower exports of capital goods and of automotive vehicles, parts, and engines, which were partially offset by an increase in exports of foods, feeds, and beverages.  Referencing the Full Release and Tables for May (pdf), in Exhibit 7 we find that our exports of capital goods fell by $835 million to $42,689 million on decreases of $446 million in exports of civilian aircraft and $279 million in exports of computer accessories.  In addition, our exports of automotive vehicles, parts, and engines fell by $348 million to $12,588 million on a $334 million decrease in our exports of automotive parts other than tires and engines, and our exports of consumer goods fell by $236 million to $15,568 million on a $224 million decrease in our exports of jewelry and a $141 million decrease in our exports of pharmaceuticals, which was partially offset by a $327 million increase in our exports of artwork, antiques, and other collectibles.  At the same time, our exports of foods, feeds and beverages rose by $544 million to $10,364 million on a $213 million increase in our exports of soybeans, and our exports of industrial supplies and materials rose by $47 million to $32,529 million on increases in exports of $486 million in petroleum products other than fuel oil, $240 million in our exports of natural gas liquids, and $208 million in our exports of crude oil, which were partially offset by a $552 million decrease in our exports of nonmonetary gold.  Meanwhile, our exports of other goods not categorized by end use rose by $489 million to $5,407 million....

Exhibit 8 in the Full Release and Tables gives us seasonally adjusted details on our imports and shows that a $2,319 million increase to $36,172 million in our imports of industrial supplies and materials accounted for more than two-thirds of the increase in our imports, as our imports of nonmonetary gold rose by $956 million, our imports of crude oil rose by $735 million, and our imports of finished metal shapes rose by $197 million. In addition, our imports of consumer goods rose by $1,253 million to $47,945 million on a $215 million increase in our imports of jewelry and a $210 million increase in our imports of cellphones, and our imports of automotive vehicles, parts and engines rose $267 million to $29,003 million on a $413 million increase in our imports of passenger cars.  At the same time, our imports of foods, feeds, and beverages rose by $78 million to $10,802 million with small increases in several line items, and our imports of goods not categorized by end use rose by $240 million to $7,601 million.  Offsetting those increases, our imports of capital goods fell $864 million to $48,704 million on a $963 million decrease in our imports of civilian aircraft and a $348 million decrease in our imports of computers, which were only partially offset by by a $516 million increase in our imports of telecommunications equipment.

Tto gauge the impact of April and May's international trade on 2nd quarter domestic growth figures, we need to use exhibit 10 in the pdf for this report, which gives us monthly goods trade figures by end use category and in total, already adjusted in chained 2009 dollars, the same inflation adjustment used by the BEA to compute trade figures for GDP, albeit they are not annualized here.  From that table, we can see that 1st quarter real exports of goods averaged 117,576.3 million monthly in 2009 dollars, while inflation adjusted April and May exports were at 119,443 million and 117,626 million respectively in that same 2009 dollar quantity index representation.   Annualizing the change between the first quarter and the April - May average, we find that the 2nd quarter's real exports are running at a 3.3% annual rate above those of the 1st quarter, or at a pace that would add about 0.27 percentage points to 2nd quarter GDP if maintained through June.  In a similar manner, we find that our 1st quarter real imports averaged 178,034 million monthly in chained 2009 dollars, while inflation adjusted April and May imports were at 177,996 million and 178,730 million in those inflation adjusted dollars respectively.   That would indicate that so far in the 2nd quarter, our real imports have increased at a 0.7% annual rate from those of the 1st quarter.  Since imports subtract from GDP because they represent the portion of consumption or investment that occurred during the quarter that was not produced domestically, their increase at a 0.7% rate would thus subtract about 0.09 percentage points from 2nd quarter GDP.  Hence, if the trade deficit at the April - May level is maintained through June, our improving balance of trade in goods would add about 0.18 percentage points to the growth of 2nd quarter GDP.  Note that we have not computed the impact of the less volatile change in services here because the Census does not provide inflation adjusted data on that trade, and moreover, there is usually not enough change in nominal exports and imports of services to materially impact GDP anyway..

 

(Note: the above was excerpted from my weekly synopsis at Marketwatch666)

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trade no Q2 impact

My experience is they revise internally before we see it on trade data and those import/export price deflators are often key.

So glad you covered this though, trade is now a huge campaign issue.

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