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Economy in Brief

U.S. Trade Deficit Shrinks With Recession To Its Lowest Since 1999
by Tom Moeller July 10, 2009

The U.S. foreign trade deficit reached its lowest level since 1999 as the recession lowered imports enough to offset the rise in oil prices. The deficit of $26.0B shrank from the revised April level of $28.8B. (Data revisions extend back to 2006.) Consensus expectations had been for an overall May trade deficit of $30.0B. Exports rose for just the second month this year. Nonetheless, recessions abroad have lowered exports by 7.2% just since December. U.S. imports similarly fell with the recession, but the decline also reflected lower oil costs. Nonpetroleum imports ticked up 0.1% from April but remained down 28.7% from last year. They have fallen 14.8% since December. Petroleum imports fell 3.4% as reduced usage (volumes) offset the m/m rise in prices. So far this year petroleum imports have fallen 23.1%.

Adjusted for price inflation, the trade deficit in goods also narrowed to $36.2B, the lowest since 1999. It was down from $49.3B last May.

Crude oil prices rose to an average of $51.21 per barrel versus the February low of $39.22. Nevertheless, prices still were down 51.9% from last May. As mentioned above, despite higher oil prices, the overall value of petroleum imports fell 3.4% during May but the quantity imported fell 12.9% and 9.7% y/y with the recession.

Real non-auto consumer goods imports fell 14.1% y/y and remained near their lowest level since 2005 while imports of automotive vehicles & parts were down by exactly one-half. Non-auto capital goods imports continued to reflect the weakness in investment and fell 25.9% y/y to their lowest since 2004.

ervices imports fell another 1.3%, as they did in April (-11.9% y/y), and were down for the ninth consecutive month. Travel imports were down 14.7% during that period as passenger fares dropped by 25.4%.

Though real exports rose 1.9% month-to-month, recessions abroad caused them to fall by 18.8% year-to-year to the lowest level since late-2005. The chained dollar value of non-auto consumer goods exports reversed some of the April decline but remained down 9.9% y/y. Real capital goods exports ticked up 0.4% but were off 19.5% y/y while exports of automobiles & parts were off by nearly one-half from last year.

Nominal exports of services slipped 0.4% for the month but they were down 12.4% y/y. Travel exports fell 22.5% y/y as fewer foreign citizens came to the U.S. even as passenger fares fell 22.3%.

The U.S. trade deficit in goods with China deepened just slightly to $16.8B but remained near the lowest level since early-2006. Imports from China fell 15.5% y/y but U.S. exports fell a lesser 8.6%. The trade deficit with Japan also deepened slightly to $3.2B but it remained near its shallowest since 1990. The U.S. recession drove imports from Japan down by roughly one-half year-to-year while exports fell by 29.1%.

The international trade data can be found in Haver's USECON database. Detailed figures are available in the USINT database.

Today's House testimony by Fed vice-Chairman Donald L. Kohn titled Federal Reserve Independence can be found here 

Foreign Trade  May April Y/Y 2008 2007 2006
U.S. Trade Deficit $26.0B $28.8B $60.5B (7/08) $695.9 $701.4 $760.4
 Exports - Goods & Services 1.6% -2.0% -21.3% 11.2% 13.2% 13.3%
 Imports - Goods & Services -0.6% -1.5% -31.3% 7.6 6.0% 10.8%
  Petroleum -3.4% 1.8% -56.3% 37.0% 9.4% 20.1%
  Nonpetroleum Goods 0.1% -2.1% -28.7% 1.5% 4.8% 9.1%

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