EmailThe U.S. trade deficit expanded from $43.6B in April to $50.3 billion in May. This is the widest the trade deficit has been since it reached $59.5 in October 2008. The Briefing.com consensus expected the trade deficit to increase to $44.0 billion.
The primary culprit for the expansion came from petroleum demand. Net petroleum imports increased from $26.1 billion in April to $30.4 billion in May and accounted for 47% of the increase in the May trade deficit. Surprisingly, the increase in petroleum demand came at a time when crude oil prices were falling and manufacturing production growth was slowing. Normally, growth in the petroleum deficit occurs when at least one of those scenarios is positive.
Total exports narrowed in May, falling from $175.8 billion in April to $174.9 billion. Total imports increased by $5.6 billion in May, from $219.4 in April to $225.1 billion.
The goods deficit widened to $64.9 billion in May from $58.2 billion. The services surplus increased from $14.5 billion in April to $14.7 billion in May.
In real terms, the goods deficit increased from $43.9 billion in April to $47.8 billion in May. Even with this month's increase, the average goods deficit this quarter is still $4.6 less than the first quarter and will still provide support for positive second quarter GDP growth.
The increase in the trade deficit was not the result of production returning to Japan either. The trade deficit with Japan fell from $3.609 billion in May 2010 to $2.640 billion in May 2011 as imports of motor vehicles fell from $3.384 billion in May 2010 to $2.019 billion in May 2011. As Japanese production returns to more normal conditions, we expect to see a surge in exports from Japan as U.S. producers restock their inventories following the supply shortages. This should result in the trade deficit widening further from its current level over the next few months.
