Summary
Last Friday (8/12), the Commerce Department reported that the June trade deficit rose to $58.8 billion, the third largest in history. This compared with a revised May deficit of $55.4. Taking into account the trade-only impact on gross domestic product, the higher June deficit could shave a little off revised second-quarter GDP when it is released later this month.
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The Numbers in General
* The June trade deficit (goods and services) came in at $58.8 billion, up $3.4 billion from May's revised shortfall of $55.4 billion (originally reported at minus $55.3 billion). The consensus forecast for June contemplated red ink of something a bit over $57 billion.
* February 2005's deficit of $60.12 billion remains the monthly record. November 2004's $58.98 billion presently holds down second place, just slightly higher than the most recent result of $58.82 billion.
* The trade deficit for 2005's first six months exceeded last year's January-June red ink by a meaningful $52.0 billion, or 17.9%.
2005 2004 Y/Y
------- ------- -------
June $ 58.816 $ 54.894 7.1%
May $ 55.426 $ 48.742 13.7%
April $ 56.899 $ 48.406 17.5%
-------- -------- -----
2nd Quart. $171.141 $152.042 12.6%
-------- -------- -----
March $ 53.562 $ 46.966 14.0%
February $ 60.117 $ 45.834 31.2%
January $ 58.077 $ 46.053 26.1%
-------- -------- -----
1st Quart. $171.756 $138.853 23.7%
-------- -------- -----
Year to Date $342.897 $290.895 17.9%
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* June's trade deficit was the result of imports totaling $165.65 billion, and exports totaling $106.83 billion. These figures compared with respective revised import/export figures for May of $162.21 billion and $106.78 billion. Thus, in comparing June to May, imports rose $3.44 billion or 2.1%; exports rose $0.05 billion or less than 0.1%. An increase in the value of crude oil imports contributed almost $900 million to overall June imports.
* The net export result is one of six major components of gross domestic product. June's increase pulls the April through June average up to $57.05, versus the April and May average of $56.16 billion. Annualized, the difference comes to almost $3.6 billion. Because it is a deficit, it is a subtraction from GDP.
The Crude Oil Data
* As the table below indicates, June crude oil imports totaled $14.58 billion, $0.85 billion more than May's $13.73 billion. The rise was the net result of a modest increase in import volume (+2.8%), accompanied by a 3.1% rise in price ($44.40 per barrel in June, versus $43.08 per barrel in May).
* Although the cost of imported crude oil is different than the price of West Texas intermediate crude, the US benchmark grade, respective price trends certainly follow each other. The average of the WTIC end-of-May and end-of-June spot prices was $57.48 per barrel, versus the $44.40 per barrel cost assigned to imported crude oil in the June trade report. As of last Friday (8/12), the WTIC spot price was well over $65 per barrel. This is an indication of the potential magnitude of higher prices for imported crude over at least the next couple to few trade reports.
* Crude oil imports were equal to 8.8% of total imports in June, up from 8.5% in May. In June, crude imports were equal to 10.5% of goods-only imports, which were reported at $138.5 billion.
(NOTE: The above calculations take license with mixing seasonally adjusted and seasonally unadjusted data. For the purpose at hand, the distortion in not significant.)
* During 2005's first six months, crude oil imports totaled 1.907 billion barrels, valued at $78.1 billion. (This was equal to about 8.0% of total imports. Of goods-only imports for this six-month period [$810.8 billion], crude imports equaled 9.6%.)
* By comparison, during 2004's first six months, crude oil imports totaled 1.903 billion barrels, virtually the same as 2005's volume. However, owing to increasing prices, 2005's six-month cost exceeded last year's by a very substantial $18.9 billion, or 31.9%.
* For all of 2004, crude oil imports totaled $131.7 billion, about 7.5% of total imports. Of goods-only imports ($1472.9 billion) for the twelve-month period, crude imports equaled 8.9%. (Again, these calculations mix seasonally adjusted and seasonally unadjusted data).
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TOTAL U.S. IMPORTS AND CRUDE OIL IMPORTS*
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Crude Oil Imports**
Total -----------------------
Imports# Barrels Value Avg. Crude/
Year/ -------- -------------- Price Total
Month (Amounts in Billions) Per Bbl. (%)
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2005
Jun. $ 165.650 0.328 $ 14.578 $44.40 8.8
May 162.208 0.319 13.726 43.08 8.5
Apr. 163.640 0.314 14.045 44.76 8.6
Mar. 156.914 0.326 13.410 41.14 8.5
Feb. 161.877 0.297 10.942 36.85 6.8
Jan. 160.656 0.323 11.410 35.55 7.1
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2005
S/T $ 970.945 1.907 $ 78.111 $40.96 8.0
===============================================
2004
Dec. $ 156.393 0.321 $ 11.689 $36.46 7.5
Nov. 157.618 0.330 13.577 41.19 8.6
Oct. 154.098 0.313 13.107 41.84 8.5
Sep. 149.607 0.297 11.143 37.52 7.5
Aug. 150.705 0.334 12.196 36.54 8.1
July 147.523 0.324 10.818 33.38 7.3
June 149.143 0.345 11.631 33.74 7.8
May 145.141 0.318 10.535 33.14 7.3
Apr. 142.857 0.312 9.662 31.00 6.8
Mar. 142.139 0.330 10.118 30.66 7.1
Feb. 138.223 0.288 8.414 29.17 6.1
Jan. 135.584 0.310 8.853 28.57 6.5
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2004
Total $1769.031 3.822 $131.743 $34.47 7.5
===============================================
2003 $1517.011 3.676 $99.167 $26.98 6.5
1998 1098.363 3.243 37.252 11.49 3.4
1993 713.058 2.543 38.469 15.13 5.4
1988 545.715 1.888 25.844 13.69 4.7
1983 323.874 1.294 38.184 29.51 11.8
1978 208.191 2.392 32.140 13.43 15.4
1973 89.342 1.393 4.593 3.30 5.1
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*Source: US Department of Commerce. **Not
seasonally adjusted. #Goods and services,
seasonally adjusted. MEMO ITEM: Crude oil
to goods-only imports: 1973 = 6.5%, 2004
= 8.9%, June 2005 = 10.5%.
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What would the trade deficit look like if the United States neither imported nor exported any crude oil?
Employing the figures in the above tables (remembering there is the mixing of seasonally adjusted and unadjusted data), in the absence of oil imports, the June deficit would have come in at $44.2 billion, $14.6 billion or 24.8% lower than the reported $58.8 billion.
For 2005's first six months, the deficit came in at $342.9 billion. With no US crude oil imports, the figure would have been $264.8 billion, or 22.8% less.
During 2004, zero oil imports would have lowered the year's deficit by $131.7 billion, or by about 21.3%.
Selected Venues in Which the
Deficit is Being Created
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U.S. TRADE DEFICIT BY SELECTED
COUNTRIES/REGIONS (Ranked in
Order of June Size. Amounts
in Billions of $s and Are
Not Seasonally Adjusted)
--------------------------------
2005 2005
Country/ --------------------
Region June May
--------------------------------
China 17.594 15.754
OPEC 7.746 7.268
Japan 6.946 6.583
Canada 5.401 4.750
Mexico 4.476 4.400
Germany 4.364 4.493
Italy 1.759 1.678
Korea 1.288 1.502
Taiwan 1.173 0.873
Russia 0.937 0.781
UK 0.861 0.631
--------------------------------
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U.S. TRADE DEFICIT BY SELECTED COUNTRIES/REGIONS
(Ranked in Order of 2005 Size. Amounts Are in
Billions of $s and Are Not Seasonally Adjusted)
---------------------------------------------------------
2005 % Change
Country/ Through ---------
Region June-a Annual-b 2004 2003 2004/2003
---------------------------------------------------------
China 90.092 180.184 161.938 124.068 30.5
Japan 41.617 83.234 75.562 66.032 14.4
OPEC 40.965 81.930 71.843 51.065 40.7
Canada 32.621 65.242 66.480 51.671 28.7
Mexico 24.476 48.952 45.067 40.648 10.9
Germany 24.420 48.840 45.850 39.281 16.7
Italy 9.271 18.542 17.413 14.854 17.2
Korea 8.486 16.972 19.756 13.157 50.2
Russia 5.915 11.830 8.930 6.171 44.7
Taiwan 5.741 11.482 12.879 14.152 -9.0
UK 4.542 9.084 10.274 8.967 14.6
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a = actual 2005 cumulative. b = annualized.
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NOTE: The subject of trade has provided the inspiration to put together a short piece on the recent passage of "CAFTA" ("Central America Free Trade Agreement"). I expect to have this out within the next couple to few days.
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