–Crude Prices Fall, Cutting Imports;Gap W/China -$26b;W/Japan -$6.4b

By Joseph Plocek

WASHINGTON (MNI) – U.S. May trade data were almost as expected,
implying there will be few revisions to expectations for Q2 GDP.

The May trade balance printed -$48.7 billion, as imports fell
$1.6 billion on the back of a huge decline in oil. Crude oil and
related product imports fell $3.6 billion in a second monthly drop.

Exports posted +$0.4 billion overall. The exports gain was led by
soybeans (+$1.95 billion) and electrical (+$0.5 billion). The advancing
exports came despite nonmonetary gold, used in jewelry and industrial
devices, at -$878 million. Exports of consumer goods, oil, and autos
fell.

Imports of autos printed +$745 million to $25 billion, the highest
on record. Imports of electronics rose but consumer goods dipped. The
driving force in imports remained the more than $2 drop in crude prices
to $107.91 a barrel. World oil prices have since fallen further and can
be expected to cut June imports as well.

Unadjusted, the trade gap by country included: China at -$26
billion after -$24.6 billion in April, Japan -$6.4 billion after -$6.3
billion, and OPEC -$11.2 billion after -$11.5 billion.

Mexico’s unadjusted gap printed -$6.3 billion, a high since
May 2008 despite lower oil prices, and against -$5.4 billion in April.
This could mean more autos and electronics are being made across the
border. The balance with Canada was -$2.2 billion after -$3.3 billion,
indicating the effect of lower priced oil.

There were still no big signs of Europe’s problems: the unadjusted
balance with the E.U. was -$10.5 billion after -$8.7 billion. The May
balance with South Korea was -$2 billion after -$1.8 billion in April;
the current level is the worst since -$2.3 billion in November 2004 and
could reflect the electronics imports.

The real trade balance on average for April-May stands about 1%
worse than the Q1 average. This will cut Q2 GDP less than implied
in the April data alone, but that is what forecasters expected.

**MNI Washington Bureau: (202)371-2121**

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