Today the Commerce Department reported solid pickups in both exports and imports in May, resulting in a monthly trade deficit of $42.3 billion, up $2 billion from April. Both the $3.5 billion increase in exports and the $5.5 billion increase in imports reversed declines in April. On the export side, increases in sales of capital goods accounted for the majority of the May rebound. A strong upturn in capital goods exports has been a major driver of the manufacturing recovery this year. On the import side, purchases of consumer goods as well as computers accounted for most of the increase.
Over the past three months ending in May, capital goods exports rose at an annual rate of 34 percent, the fastest pace in nearly five years. As one of the most export-intense industries, this surge helped propel U.S. machinery production to a near 30 percent annual pace during the last three months, more than twice as fast as overall manufacturing production.
In stark contrast to the early stages of the last recovery, exports are helping manufacturers come back from this recession. Through the year ending in May, manufactured exports rose by 24 percent and accounted for one-third of the increase in overall shipments. Given the recent weakness in the U.S. labor market, continued strong export growth will be critical to keeping the recovery on track.