Submitted by Atlas Indicators Investment Advisors on July 16th, 2018
America’s trading shortfall improved in May 2018 according to the Bureau of Economic Analysis. Our nation’s goods and services deficit dropped $3.0 billion to $43.1 billion from April’s downwardly revised tally (originally $46.2 billion). This improvement put the monthly trade gap at its narrowest reading since October 2016.
Our exports surged 1.9 percent and are up 11.7 percent versus a year earlier. Goods led the monthly uptick, rising 2.6 percent. Digging a little deeper, foods, feeds, & beverages surged 14.1 percent, and capital goods rose 4.4 percent. Consumer goods excluding autos gained 3.4 percent. However, there were a couple of declining categories worth mentioning. Industrial supplies and materials declined 2.8 percent while vehicles reversed 2.6 percent.
Imports were higher also, rising 0.4 percent in May (following a decline of 0.2 percent in April) and 8.3 percent year-over-year. American companies continue investing in foreign-made capital goods which climbed 3.6 percent. Likewise, foods, feeds, & beverages ticked 0.9 percent higher. Automotive and non-auto consumer goods both declined, falling 1.0 percent and 0.9 percent respectively.
America continued exporting more services than it imports, causing this surplus to widen. Service exports increased 0.6 percent as travel, financial services, technology business services, and intellectual property sales to foreign buyers all improved. On the flipside, imported services declined 0.1 percent in part because Americans traveled abroad less.
This trade deficit improvement is going to add to America’s second-quarter gross domestic product (GDP) figure due to be released near the end of this month. Trade deficits are inherently negative to the output calculation, so while trade will continue to subtract from the total, it will take away less than in the first quarter, creating an improvement in the comparison. Atlas expects the GDP release to show an acceleration occurred from April through June of this year compared to the first three months.
