Implications: Oil was the driving force behind the large increase in the trade deficit in May, with higher oil prices, a greater volume of oil imports, and lower oil exports. As a result, the trade deficit came in much higher than the consensus expected. In fact, of the 73 economic groups that forecasted the trade deficit, none thought it would be this high. It was also the largest trade deficit since late 2008. However, oil prices were down in June so next month we should see at least a partial reversal of May's expansion in the trade deficit. Beneath the headlines, the total volume of international trade in and out of the US – imports plus exports – hit an all-time high in May, finally fully recovering from the financial panic that hit cross-border business activity even more than domestic activity. In other news this morning, weekly (same-store) chain store sales were up 5.5% last week versus the same week a year ago, continuing the strength these sales exhibited in June. At present, it looks like real GDP grew at a 1.5% annual rate in Q2 but we are forecasting a substantial acceleration in the second half of the year. Later this week we will be incorporating reports on retail sales, inventories, and industrial production into these forecasts.
Click here to view the entire report.
|