Real Trade Report

Calculated risk is out today and just reported the head line trade data and linked to the Wall Street Journal calling the improvement in the trade balance a surprise

But the real trade deficit improved from $ -46,966 M (2000 $) in March to $-46,679 in April and $-43,589 M in May. Remember, the improvement from March to May is what will be reported as a positive for the second quarter real GDP growth. In the GDP accounts trade and inventories are calculated on the basis of the change from quarter end to quarter end. All the other GDP data is the three month moving average.

The improvement was a continuation of the recent trend of weak imports and strong exports.
But this month there was an especially big drop in petroleum imports as May, 2008 real petroleum imports were down 21% from May, 2007. On a smoothed basis (3 month moving average) real nonpetroleum imports were down 1%. On an unsmoothed basis,May real petroleum imports were about the same as they averaged in 2002.

One of the things to remember is that US real oil imports represent the US marginal demand curve for world oil. As domestic consumption weakens essentially all the drop in domestic oil demand shows up as a drop in imports.

PS. Corrected typo on May trade deficit data.
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