Trade Deficit Widens Less Than Estimates, Import Prices Jump on Metal Price Increases

- The Trade Deficit for April widened to -$63.4B versus estimates of -$65.0B and -$61.9B in March.
- The Import Price Index for May rose 1.6% versus estimates of a .7% gain and a 2.1% increase in April.

BOTTOM LINE: The US trade deficit widened in April as the cost of imported oil rose and purchases of industrial machinery and automobiles increased, Bloomberg said. The US deficit in oil trade rose to $21 billion from $20 billion the prior month. The rapid growth of the US economy compared with other industrialized nations is the main reason for the large deficit. The US economy will grow 3.4% this year, beating the growth of all other industrialized nations, according to the International Monetary Fund. I expect the trade deficit to only improve modestly over the intermediate-term as US growth, while slowing, continues to outpace the growth of other industrialized nations.

Prices of imported goods into the US rose twice as much as expected in May, led by rising costs for oil and metals, Bloomberg reported. Excluding petroleum, prices rose .6%. As well, excluding petroleum, import prices rose 1.5% over the last 12 months. A 7.8% rise in metals prices was the largest gain since record-keeping began in 1988. The price of imported consumer goods, excluding autos, rose only .3%. Imported prices for autos, parts and engines rose .1%. I expect Import Prices to decelerate meaningfully over the intermediate-term as prices for oil and metals fall substantially from current inflated levels.