U.S. trade, services industry data point to slowing economy

U.S. trade, services industry data point to slowing economy
  • Clock-gray 18:50
  • calendar-gray 03 July 2019

The U.S. trade deficit jumped to a five-month high in May as imports of goods increased, likely as businesses restocked ahead of an increase in tariffs on Chinese merchandise, overshadowing a broad rise in exports, APA reports citing Reuters. 

The wider trade deficit reported by the Commerce Department on Wednesday added to weak housing, manufacturing, business investment and moderate consumer spending in suggesting that economic growth slowed in the second quarter. The labor market also appears to be losing momentum, with private employers adding far fewer-than-expected jobs to their payrolls in June.

News on the vast services sector was also downbeat.

The slowdown in activity as last year’s massive stimulus from tax cuts and more government spending fades could prompt the Federal Reserve to cut interest rates this month. The U.S. central bank last month signaled it could ease monetary policy as early as at its July 30-31 meeting, citing rising risks to the economy from the trade war between the United States and China, and low inflation.

The trade deficit surged 8.4% to $55.5 billion. Data for April was revised higher to show the trade gap widening to $51.2 billion instead of the previously reported $50.8 billion. Economists polled by Reuters had forecast the trade gap widening to $54.0 billion in May.

The goods trade deficit with China, a focus of President Donald Trump’s “America First” agenda, increased 12.2% to $30.2 billion, with imports rising 12.8%. Trump imposed additional import tariffs on Chinese goods, after a breakdown in negotiations, prompting Beijing to retaliate.

Trump and Chinese President Xi Jinping last week agreed to a trade truce and a return to talks. White House trade adviser Peter Navarro said on Tuesday talks were heading in the right direction, but it would take time to get the right deal made.

The U.S.-China trade tensions have caused wild swings in the trade deficit, with exporters and importers trying to stay ahead of the tariff fight between the two economic giants.

The dollar dipped against a basket of currencies in thin U.S. trade ahead of Thursday’s Independence Day holiday. U.S. Treasury prices rose and stocks on Wall Street were higher.

In May, goods imports increased 4.0% to $217.0 billion. Apart from drawing more imports from China, imports from the European Union, Mexico and Canada increased to record highs in May. Imports of consumer goods rose $1.4 billion, while those of motor vehicle and parts soared $2.3 billion to an all-time high.

There were also big increases in imports of capital goods and industrial supplies and materials. Some of the jump in the import bill in May also reflected higher petroleum imports and more expensive crude oil.


Other news