U.S. trade data hint at a rebound
In a rare bit of good news for the economy, the U.S. trade deficit narrowed in May to its lowest point since November 1999 as American exports unexpectedly rose and imports continued to fall.
The latest trade data, released Friday by the Commerce Department, suggested that U.S. exports, which shot up 1.6% from April, may finally have begun to rebound after virtually collapsing last fall and into early this year.
The better-than-expected May trade figures prompted analysts to nudge up their estimate of U.S. economic output for the second quarter.
“We thought the [gross domestic product] was going to drop more than 2%,” said Nigel Gault, chief U.S. economist at IHS Global Insight in Lexington, Mass. “After the report, we think it’s less than 2%.” The U.S. GDP contracted 5.5% in the first quarter.
Still, despite the improvement, analysts note that exports remain low. And, in contrast to some past downturns, overseas sales are considered unlikely to bounce back sharply enough to propel an economic recovery.
Demand from Europe and Japan is not expected to accelerate any time soon. What’s more, with many leading economies struggling to curb rising unemployment at home, there are concerns of continuing or rising protectionism -- despite a pledge by the heads of major industrial nations, including President Obama, at the G-8 summit in Italy this week to promote open markets and reject protectionist measures.
Imports to the U.S. fell 0.6% in May, the 10th straight monthly decline, reflecting the weak demand in the American economy overall. Businesses bought less oil and industrial supplies, and recession-battered consumers cut back on purchases of things such as apparel and jewelry.
Hence, the trade deficit fell in May to $26 billion -- down from nearly $29 billion in April and about $60 billion in May 2008 and during much of last year. Though the decline was welcomed by analysts, they noted that it was hardly cause for celebration.
“We’re having to borrow less money every month from foreign sources,” said Charles W. McMillion, president of MBG Information Services, a trade research firm in Washington. “But 17 months into this deep recession, we’re still running a trade deficit of almost $1 billion a day.”
Moreover, he and others pointed out that the U.S.’ politically sensitive trade deficit with China widened in May, by 4.4%, to $17.5 billion.
The Commerce Department data showed that U.S. exports of goods and services totaled $123.3 billion in May. The seasonally adjusted increase from April was largely because of a jump in petroleum product sales. But there were also solid gains in shipments of chemicals and some other industrial supplies, which as a whole jumped almost 10% over the month.
Exports of capital goods, excluding automobiles and parts, ticked up 0.4% in May -- a positive sign given that this category, which includes industrial machines, semiconductors and airplanes, accounts for almost half of merchandise exports and is vital to America’s industrial strength.
“They are still pretty small green shoots,” said Frank Vargo, vice president of trade at the National Assn. of Manufacturers. For capital goods exports to take off, he said, foreigners would have to ramp up production and equipment purchases.
“I’m not hearing optimistic things from small exporters yet,” he said.
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