The trade report oil wrought

May's trade figures show the third largest trade monthly deficit on record with China, but a big drop in petroleum imports (by value, not by volume!) helped shrink the May trade deficit to its second smallest size this year. Hey, every little bit helps.

The U.S. Census Bureau and the U.S. Bureau of Economic Analysis, through the Department of Commerce, announced today that total May exports of $106.9 billion and imports of $162.2 billion resulted in a goods and services deficit of $55.3 billion, $1.6 billion less than the $56.9 billion in April, revised. May exports were $0.2 billion more than April exports of $106.7 billion. May imports were $1.4 billion less than April imports of $163.6 billion.

Per the Commerce Department's summary, the $1.55bn reduction in the deficit was due almost solely to a reduction in the goods deficit, that in turn due almost solely to the $1.61bn reduction in goods imports, and that in turn thanks overwhelmingly to a $1.31bn fall in petroleum imports.

The NSA figures show that US energy-related petroleum products imports in May increased 8.0 million barrels, but thanks to prices being $1.68 per barrel lower, the total value of ERPP imports decreased $333 million.

Thus far in 2005, US non-petroleum goods imports (SA) are growing 12.2% while total exports are growing 11.4%. Cheaper petroleum prices can help matters, but the fundamental problem of the US trade deficit is that the US simply imports too much stuff. Goods imports from China (NSA) hit $19.1bn in May, the highest level this year and the third highest montly total ever. On the other hand, imports from Japan -- the country with which the US runs its second largest goods deficit -- were at their second lowest level of the year and imports from Canada are also trending down from their March peak.

There continues to be problems with the EU as well. Imports from the EU in May hit $26.6bn and the monthly goods trade balance came in at -$10.5bn, the largest of the year. This is nothing compared to the -$15.8bn May balance with China, yet the sluggish EU economies are nearly as big a contributor to the US trade deficit as is overproducing/underconsuming China.

One final note: June delivery contracts for petroleum on the NYMEX were much higher than for May delivery three months out, but were actually lower one month out. Thus we probably won't see a big oil import bill in the June trade report either; but take cover when the July and August figures are released!