The Bureau of Economic Analysis and the Census Bureau reported that the U.S. trade deficit narrowed in May for the second month in a row. The trade balance increased from -$50.6 billion in April to -$48.7 billion in May. This month’s improvement was due to reduced imports, which fell from $233.3 billion to $231.8 billion. Exports, on the other hand, rose from $182.7 billion to $183.1 billion.
Petroleum imports dropped from $38.6 billion to $35.5 billion, helping to reduce the petroleum trade deficit to $24.9 billion. Much of this is a function of lower petroleum prices. If you exclude petroleum, the trade deficit would have widened.
Goods exports were up just $20 million between April and May to $130.7 billion. Areas for growth for exports included foods, feeds, and beverages (up $900 million) and capital goods excluding autos (up $673 million). However, these were counterbalanced with declining exports from the industrial supplies and materials (down $843 million), consumer goods (down $177 million), and automotive (down $105 million) sectors.
The narrower trade deficit in goods (which improved from $65.2 billion to $63.5 billion) was primarily the result of a decline in goods imports from $195.9 billion to $194.3 billion. The largest drop in goods imports came from the industrial supplies and materials sector, which dropped from $65.2 billion to $61.6 billion (or $3.6 billion). Consumer goods and food imports also fell by $375 million and $50 million, respectively. Gains were seen in capital goods except automotive (up $1.4 billion) and automotive (up $745 million).
Manufactured goods exports rose in May, mirroring the larger trends, up from $84.1 billion to $87.4 billion (not seasonally adjusted). Year-to-date manufactured goods exports in 2012 are 7.8 percent higher relative to the first five months of 2011.
Last month, export growth slowed across-the-board using non-seasonally adjusted data with slowing global economies have an impact on our overseas sales. In May, though, there were some notable improvements in almost every region except South America. In general, year-to-date exports are higher in 2012 than at this same time in 2011 in most regions. This is true even in Europe, with YTD exports to the continent equaling $27.5 billion and $28.1 billion in 2011 and 2012. This suggests that even with Europe’s struggles, they continue to be a major market for our products.
Overall, this report is a definite improvement from the April. With exports picking up and falling oil prices reducing imports, the trade deficit narrowed. More importantly, the export growth appeared to be rather broad-based, including to Europe.
However, we must be continue to proceed with caution as we still have more to do in order to double exports by 2014. Exports remain a key driver for manufacturers and jobs and they are looking to Washington for policies to help them continue to grow exports and find new markets.
Chad Moutray is chief economist, National Association of Manufacturers.