RTTNews - With the value of exports showing a notable increase and the value of imports edging lower, the Commerce Department released a report on Friday showing that the U.S. trade deficit unexpectedly narrowed in the month of May.
The report showed that the trade deficit narrowed to $26.0 billion in May from a revised $28.8 billion in April. This marks the smallest trade deficit since November of 1999.
Economists had been expecting the deficit to widen to $30.0 billion from the $29.2 billion originally reported for the previous month.
A jump in exports contributed to the narrower deficit, with the value of exports rising 1.6 percent to $123.3 billion in May from $121.4 billion in April.
At the same time, the value of imports edged down 0.6 percent to $149.3 billion in May from $150.2 billion in the previous month. With the decrease, imports fell for the tenth consecutive month, reflecting a reduction in consumer spending.
Peter Boockvar, equity strategist at Miller Tabak said, With the trend expected to continue for a few years to come as the savings rate rises and deleveraging continues, the U.S. has to make goods that the rest of the world wants in order to maintain solid export growth.
The Commerce Department noted that the goods deficit narrowed to $37.3 billion in May from $39.9 billion in April, while the services surplus widened to $11.4 billion from $11.1 billion.
Economists have noted that the narrower than expected deficit is likely to contribute positively to economic growth in the second quarter.
Commerzbank analyst Bernd Weidensteiner said that the positive contribution from foreign trade counter-balances most of the negative influence of the ongoing decline of inventories.
Since government spending will also rise in the second quarter, there is a distinct upward risk for our forecast of a 3 percent decline in GDP, Weidensteiner added.
In other trade-related news, import prices showed a substantial increase in the month of June, according to a report released by the Labor Department on Friday, with the price growth reflecting a sharp rise in the prices of petroleum imports.
The report showed that import prices jumped 3.2 percent in June following a 1.4 percent increase in May. The increase was largely due to a 20.3 percent increase in the prices of petroleum imports, which rose 9.3 percent in the previous month.
Without the increase in petroleum prices, import prices increased by a much more modest 0.2 percent in June compared to a 0.1 percent increase in May.
On an annual basis, total import prices were down 17.4 percent, while the prices of non-petroleum imports were down 6.5 percent.
The Labor Department also said that export prices rose 1.1 percent in June after increasing by 0.5 percent in each of the two previous months.
Excluding a 4.8 percent increase in the prices of agricultural export, export prices rose 0.8 percent in June compared to a 0.3 percent increase in May.
Total export prices were down 6.4 percent compared to the same month a year ago, while non-agricultural prices were down 5.7 percent year-over-year.
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