Advertisement
Economic Forecasts

Trade Still Declining, But At a Slower Pace

Kiplinger's latest forecast on the direction of the trade deficit.

The trade deficit in May widened to its highest level since December 2018, to a seasonally adjusted $54.6 billion, from $49.4 billion in April – an increase of 9.7%. Trade in services remained in surplus at $21.5 billion, while the nominal goods deficit increased to $76.1 billion.

Both imports and exports fell, but at a slower rate in May.  Imports fell 0.9%, reflecting fewer purchases of capital equipment and automotive goods. Imports have now fallen in six of the past seven months. Exports saw a larger decline of 4.4%, as the U.S. economy was still coming out of lockdown mode. Exports fell across the board, except for consumer goods, which rose by 5%. Industrial exports saw some of the largest declines. Exports of services dropped 2% as demand for travel and transport services dried up. Factories and businesses were still operating at a limited capacity in May. The disruption in global supply chains resulted in an 11% monthly fall in exports of motor vehicles and parts. Exports of industrial supplies and materials also fell sharply. While the monthly decline in trade has eased as the economy starts to get back to normal, both exports and imports are far below their levels of one year ago, down 35% and 30% from May 2019, respectively.

Advertisement
Advertisement - Article continues below
Advertisement - Article continues below

Trade flows should gradually pick up over the next few months as economic activity recovers in the U.S. and its major trading partners. Services trade, however, isn’t going to recover anytime soon with borders still partly closed, impeding travel to and from the U.S. Travel services are down by nearly three-quarters compared with May 2019. The resurgence of COVID-19 cases in some states may keep demand subdued and prevent businesses from operating at full capacity. Thus, the rebound in trade flows is likely to progress in fits and starts.

Sources: Department of Commerce, Trade Data

Advertisement

Most Popular

12 Tax Deadlines for July 15 (It's Not Just the Due Date for Your Tax Return)
tax deadline

12 Tax Deadlines for July 15 (It's Not Just the Due Date for Your Tax Return)

Between due dates for IRA or HSA contributions, paying estimated taxes and other deadlines, there's more to do by July 15 than just filing your federa…
July 10, 2020
65 Best Dividend Stocks You Can Count On
stocks

65 Best Dividend Stocks You Can Count On

These 65 Dividend Aristocrats are an elite group of dividend stocks that have reliably increased their annual payouts every year for at least a quarte…
July 8, 2020
Know Why Your Credit Score Changes: 9 Money Moves to Consider
credit & debt

Know Why Your Credit Score Changes: 9 Money Moves to Consider

Your credit score is a key indicator of your financial well-being and of the risk you pose to lenders. How good is yours?
July 10, 2020