Weekly Industry Crib Sheet: U.S. Trade Deficit Spiked in May

July 8, 2013


ISM: Manufacturing Orders Rebound in June

Factory Orders Continue Growth

China Manufacturing Continues to Plummet

Residential Construction Bolsters Overall Spending

Jobless Claims Fall Again, but Unemployment Rate Holds

Last month, the U.S. global trade deficit grew at the fastest pace of expansion in two years, according to the U.S. Commerce Department. A weak global economy kept U.S. exports low, while auto and non-petroleum product imports hit all-time highs.

The deficit shot up 12.1 percent in May to $45.03 billion, the highest it has been in six months. Exports of goods and services decreased 0.3 percent to $187.1 billion. Sales of American farm products fell to the lowest point in more than two years. Meanwhile, imports rose 1.9 percent to $232.1 billion.

Purchases from China increased 10.7 to $36.65 billion and boosted the trade deficit with the nation 15.6 percent to $27.86 billion. Exports dipped 2.3 percent to $8.79 billion.

The U.S. trade deficit with Japan shrank 22.1 percent to $5.41 billion, as exports surged 14.6 percent to $5.79 billion and imports fell 6.7 percent to $11.19 billion.

Imports of foreign cars and auto parts rose 3.1 percent to a record $26 billion in May. Petroleum imports were up 4.4 percent to $30.9 billion. But U.S.-made auto and auto part exports also hit a record high and total exports of U.S. goods were only slightly below the record high of $188.7 billion set in December.

ISM: Manufacturing Orders Rebound in June

U.S. manufacturing picked up last month, reaching a three-month high, according to the Institute for Supply Management (ISM). ISM's Purchaser Manager's Index (PMI) ticked up to 50.9. Numbers above 50 indicate growth, while numbers below 50 show contraction.

The new figure is a notable increase from May's figure of 49. Production rose to 53.4 from 48.8, one of the largest boosts in the past five years. Export orders jumped to 54.1 in June from 51 the previous month. The Associated Press

reports that the boost could be the result of growth in Japan and parts of Europe.

But not all was rosy, as manufacturing employment fell for the first time since September 2009 to 48.7.

Twelve of the 18 manufacturing industries tracked by the ISM reported growth in June. The four reporting business contraction were textiles, transportation equipment, chemical products, and computer and electronic products.

For more details, see IMT sister publication, IMT Procurement Journal


Factory Orders Continue Growth

U.S. factory orders rose in May, bolstered by stronger business investment, according to the U.S. Commerce Department.

New orders rose 2.1 percent in May. Revised April figures show a 1.3 percent rise, adjusted up from 1 percent. The biggest boost came from rising demand for commercial aircraft, as well as industrial machinery, computers, and household appliances.

Orders for long-lasting goods, which include power generation equipment, ships, and boats, rose 3.7 percent in May. Orders for nondurable goods, including paper, chemicals, and oil, ticked up 0.7 percent.

The Commerce Department's proxy for business investment plans increased 1.5 percent, a faster pace than has been seen in the previous two months. Manufacturing has struggled most of the year, hindered by weak demand in Europe and Asia.

China Manufacturing Continues to Plummet

Two measures of manufacturing in China show slowed growth and contraction in June, respectively, most likely a result of tighter monetary policies and a cash crunch.

HSBC's purchasing managers' index (PMI) fell to 48.2 from May's 49.2. Figures below 50 signal contraction, while those above 50 indicate growth. The number missed economists' pessimistic prediction of 48.3.

Even China's official NBS China manufacturing PMI slowed to 50.1 from 50.8 in May. While the two numbers do not track the same months, they reveal the impact of the government's decision to reign in interbank lending, which had driven interest rates above 14 percent two weeks ago.

China's economic growth decelerated to 7.7 percent in the first quarter this year. The economy had grown 7.9 percent in the final quarter of 2012. Many economists are now predicting the China will miss its growth target of 7.5 percent for the year.


reported last week that Chinese President Xi Jinping had stated that officials should "not be judged just by increases in economic output," which could be a sign that that the nation's leaders are serious about normalizing growth.

Residential Construction Bolsters Overall Spending

Construction rose in May, boosting total outlays to a seasonally adjusted annual rate of $874.9 billion, a 5.4 percent increase over the same time last year. The rise is bolstered largely by a sharp increase in residential projects, which more than offset a dip in non-residential construction.

The U.S. Commerce Department reported last week that private residential construction rose 1.2 percent to the highest level in more than four years. Non-residential spending dropped by 1.4 percent. State and local activity helped push public construction up 1.8 percent.

Overall, total construction spending rose by 0.5 percent.

"You're going to see a stronger trend as homebuilding continues to pick up," Scott Brown, chief economist at Raymond James and Associates Inc. in St. Petersburg, Fla., told Businessweek

. "If we get much better job growth, it would help to support a longer-term trend of growth in construction."

Jobless Claims Fall Again, but Unemployment Rate Holds

The number of Americans seeking unemployment benefits dipped again the last week of June, the latest data shows. At the same time, employers added more jobs than expected. Yet the unemployment rate remained unchanged in June at 7.6 percent.

Initial unemployment claims decreased by 5,000, totaling 343,000 for the week ending June 29, according to the U.S. Dept. of Labor. The four-week moving average, which smoothes out week-to-week volatility, was 345,500, a decrease of only 750 from the previous week's 346,250.

In a separate report, payroll processing firm ADP (Automatic Data Processing) stated that businesses added 188,000 jobs last month. Economists had estimated gains of only 165,000. The trade, transportation, and utilities industries added 43,000 jobs last month, and construction grew by 21,000 jobs. Manufacturing, however, showed little growth, adding only 1,000 jobs.

Despite the positive news, the Bureau of Labor Statistics (BLS) reported on Friday that the unemployment rate was 7.6 percent in June, unchanged from May. According to CBS News

, the U.S. has endured 54 straight months of unemployment rates at 7.5 percent or higher, the longest stretch since the BLS started tracking figures in 1948.



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