Merk Investments: Trade Balance May 2008
The May trade balance provided a rare bit of good news in a market awash in fear over the impending demise of Fannie Mae and Freddie Mac and deleterious impact of rising inflation. The trade balance fell to -$59.79bln and the ex-petroleum rose to -$26.63bln. On an inflation adjusted basis, the deficit fell to -$43.58bln with the ex-petroleum estimate declining rising to -$39.26bln. The fall in the trade gap continues to be one of the few positives in the market and should provide at least one more quarter of healthy support to overall growth. We anticipate that import prices should add nearly one percent to growth for the quarter.
Total exports rose by 0.9% fueled by a 7.8% increase in foreign demand for civilian aircraft and a 3.8% rise in the export of industrial supplies. On a real basis exports climbed 0.7%. Total imports climbed 0.3% for the month, but on a real basis declined -1.8%. The politically sensitive bilateral trade balance between China and the US saw the deficit rise to -$21.049bln. The deficit with the EU and Japan saw improvement for the month.
Joseph Brusuelas
Merk Investments
Chief Economist/VP Global Strategy
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