The goods and services deficit was $41.9 billion in May, up by $1.2 billion from the revised $40.7 billion deficit in April (previously reported as -$40.9 billion).
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Economists had expected the deficit to grow even larger – to $42.6 billion – so this isn’t awful news.
Exports fell 0.8 percent in May to 188.6 billion, reflecting a sharp drop in goods exports, including civilian aircraft. The increase reflects a $1.5 billion decrease in exports and $0.3 billion decrease in imports. That was marginally offset by a small rise in exports of services. The trade data and a jobs report later this week are the last major indicators before the central bank’s July 15 rate decision. While the United States had a surplus in trade with Canada, wider gaps were seen with China ($30.5 billion) and Mexico ($4.6 billion).
The dollar has gained value against many other currencies this year.
Nonpetroleum exports declined 4.5% in May compared with a year earlier.
A slower global economy and a strong dollar represent hurdles for US growth.
Another factor influencing the overall trade gap: The petroleum deficit has narrowed sharply in recent years as domestic oil production surged. This was somewhat counteracted by higher exports for industrial supplies and materials (up $804 million), foods, feeds and beverages (up $181 million) and automotive vehicles and parts (up $106 million). Much of this decline is price, which fell from an average of $96.12 per barrel in May 2014 to $50.76 a barrel in May 2015. Energy products exports rose 1.3 percent, but non-energy exports, which the Bank of Canada is hoping will help drive stronger economic growth, fell 1 percent. Exports add to gross domestic product, while imports subtract.
The shortfall totaled C$3.34 billion ($2.63 billion), Statistics Canada said on Tuesday. Trade has weighed on economic output in four of the previous five quarters.
Greece’s possible exit from the euro risks destabilizing the broader European economy.
The Bank of Canada shocked markets with a rate cut in January in response to tumbling oil prices. Following a June policy meeting, officials said they would take into account “international developments” as well as inflation and labor-market data as part of their interest-rate decision.
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“Most participants are anticipating that a rate increase this year will be appropriate”, Fed Chair Janet Yellen said in a June 17 press conference. Bloomberg’s monthly GDP tracker shows the economy has been below the government’s targeted pace of about 7 percent all year.
