July 7, 2022
The trade deficit narrowed by $1.1 billion in May to $85.5 billion after narrowing by $21.0 billion in March after widening by $19.5 billion in March. While volatile on a monthly basis the deficit has widened dramatically since April of last year because imports have risen more sharply than exports. That suggests that the U.S. economy has recovered quickly from the recession, and continues to grow far more quickly than the rest of the world.
Exports rose $3.0 billion 1.2% in May to $255.9 billion after rising 3.6% in April.. It has been in a steady uptrend since the recession ended in April of 2020 as the global economy recovers. In the past year exports have risen 21.7%.
Imports climbed by $1.9 billion or 0.6% in May after falling 3.5% in April. In the past year imports have risen an impressive 23.3%. While most of the gain in imports reflects a strong underlying U.S. economy, it also incorporates an inability by both firms and consumers to get the goods they need. When domestic products are unavailable they turn to imports to get what they need.
The best gauge of global trade flows is the change in the total of both exports and imports. It has been rising steadily for the past year and It is now far higher than it was prior to the recession in February 2020.
The trade deficit in real terms was essentially unchanged in Mary after having narrowed by $19.1 billion in April. The deficit in real terms is important because that is what goes into the GDP calculation. As that deficit widens, it means that the trade component will add a significant amount to GDP growth in the second quarter/ The widening trade gap subtracted 3.2% from GDP growth in the first quarter.
Stephen Slifer
NumberNomics
Charleston, SC
Hi Steve,
I’m a bit confused, has the deficit increased so sharply as a result of overall reduced economic activity? Or is there some other factor at play here? Material costs? or? This seems surprising with the general weakness of the dollar.
Best,
Hi Chris what we are have seen in the recent trade data as well as what happened to trade in the first few months of the year were wildly distorted by the recession and subsequent rebound. The dramatic narrowing of the trade gap earlier did not mean a lot. Nor does the recent rebound. I guess the only point I was trying to make is that the increases in both exports and imports tells us nothing more than the rebound is underway with the recovery in the U.S. currently outpacing the rest of the world.
Ah, that makes sense.
Thanks