May 2017 Trade Balance Unproved

Trade data headlines show the trade balance improved from last month. Our analysis paints a stronger picture for trade using the rolling averages.

Analyst Opinion of Trade Data

Our monthly analysis using unadjusted data showed growing strength in both exports and imports relative to last month. But the data in this series wobbles and the 3 month rolling averages are the best way to look at this series. The 3 month averages are improving.

This report will have little affect on 2Q2017 GDP.

Import goods growth has positive implications historically to the economy – and the seasonally adjusted goods and services imports were reported downmonth-over-month. Econintersect analysis shows unadjusted goods (not including services) growth accelerated 2.4 % month-over-month (unadjusted data) – up 9.3 % year-over-year (up 7.2 % year-over-year inflation adjusted). The rate of growth 3 month trend is improving (rate of change of growth is accelerating).

Exports of goods were reported up, and Econintersect analysis shows unadjusted goods exports growth acceleration of (not including services) 2.9 % month-over month – up 7.0 % year-over-year (up 5.6 % year-over-year inflation adjusted). The rate of growth 3 month trend is accelerating.

The improvement in seasonally adjusted (but not inflation adjusted) exports was attributed to autos. Import growth was due to capital goods.

The market expected (from Bloomberg) a trade balance of $-47.6 B to $-45.0 B (consensus $-46.2 billion deficit) and the seasonally adjusted headline deficit from US Census came in at $46.5 billion.

It should be noted that oil imports were up 36 million barrels from last month, and up 41 million barrels from one year ago.

The data in this series is noisy, and it is better to use the rolling averages to make sense of the data trends.

The headline data is seasonally but not inflation adjusted. Econintersect analysis is based on the unadjusted data, removes services (as little historical information exists to correlate the data to economic activity), and inflation adjusts. Further, there is some question whether this services portion of export/import data is valid in real time because of data gathering concerns. Backing out services from import and exports shows graphically as follows: