The United States trade deficit shrank in May even when average prices for imported oil surged during the month to a record, according to a US Department of Commerce release on Friday. The deficit narrowed to 59.8 billion US dollars from 60.5 billion in April as both exports and imports rose to record highs.
Wall Street analysts were anticipating the deficit to widen to 62.5 billion in May pushed by the soaring energy prices. But surprisingly the volume of oil imports plunged 10.5% to their lowest level since September 2002. Exports, helped by the weak dollar, rose 0.9% in May to a record 157.5 billion, including individual records for exports to Canada, the European Union and South and Central America, according to the Commerce Department. Record-high exports of industrial supplies and materials led the rise, with a smaller increase for auto and auto parts. Consumer goods exports rose slightly to a record. Imports increased 0.3% to a record 217.3 billion with overall imports of non-petroleum goods setting a record. Crude imports were a record 31.2 billion, as prices rose 9.47 per barrel in May the biggest one-month jump ever. But crude oil import volume fell to 294 million barrels in May, from 303 million in April. A separate Department of Labor report on Friday showed petroleum prices rose 7.4% in June for a gain of 78.6% on the year. That was the largest annual increase since February 2003, the Labor department said. US Commerce Secretary Carlos Gutierrez said the galloping oil prices "tainted" an otherwise great trade report. "We're buying less petroleum, but the value is up over 64% to date. We need to be exploring and producing more of our oil ... That's job number one," Gutierrez said. He also urged Congress to give exports a further boost by approving free trade pacts with Colombia, South Korea and Panama that have been stalled since last year. Regarding China, the closely watched trade deficit widened 4% in May to 21 billion US dollars but for the first time five months of 2008 it totaled 96 billion US dollars, virtually unchanged from the same period last year. In related news other data showed US consumer confidence rose unexpectedly in early July from a 28-year low with the help of retail discounts. But the Reuters/University of Michigan Surveys of Consumers also showed a vast majority think the country is in deep recession.