Nation's Trade Deficit Widens Sharply

There is some weakness in the May trade report as the nation's trade deficit widened sharply to $41.1 billion from April's $37.4 billion. The net deficit for goods widened to $62.2 billion from April's $58.6 billion while the net surplus for services narrowed slightly to $21.1 billion.

In a negative indication on global demand, exports of both goods and services fell slightly in the month. But in a positive indication on domestic demand, imports rose a sharp 1.9 percent on top of April's 2.3 percent gain. Much of the import gain is tied to the dollar effects of higher oil prices, which jumped nearly $5 in the month, but not all of it as imports of consumer goods and autos show solid gains.

The export side of this report, however, is decidedly weak with contraction sweeping capital goods and also civilian aircraft, two areas where weakness may be deepening.

An offset to May's widening is the narrower gap in April where the deficit is unrevised at $37.4 billion. The deficit in April and May together is tracking lower than the first quarter which is a plus for second-quarter GDP. But this report will be most watched come July's data which will offer early indications on both Brexit effects and the ongoing rise in dollar.

Recent History Of This Indicator:
The nation's trade deficit is expected to widen in May, to a consensus $40.0 billion vs April's $37.4 billion. Advanced data on goods showed a gain for imports at the same time that exports fell. Still, the decline in exports was limited while the gain in imports, though a subtraction in the national accounts, points to solid foreign demand for most goods with the unfortunate and very important exception of capital goods.