Trade Surplus Widens Under Strain Of Weak Imports, Exports

Andrew Cummings
July 3, 2020

After falling 29.1 percent in April, exports jumped 6.7 percent in May to $34.6 billion, as eight of the country's 11 export sectors bounced back, notably the auto and oil industries.

Compared to 2018, exports are down more than $1.26 billion as businesses deal with the economic fallout of the global coronavirus pandemic.

Exports were down 4.4 percent to $144.5 billion, while imports fell 0.9 percent to $199.1 billion.

The U.S. usually runs a deficit in goods and a surplus in services such as medical care, higher education, royalties and payments processing. Dawood said exports are showing clear signs of recovery due to the efforts of the exporters to diversify the products, in the wake of new opportunities arising amid COVID 19 pandemic, and support from the government.

In volume, or price-adjusted, terms, exports climbed 3.8% in May while imports fell 6.7%.

"Overall, the narrowing in the trade deficit is welcome, but with exports and imports still both down by roughly one-third from a year ago, this is only the first baby step along the road to recovery", Paul Ashworth, chief North America economist at Capital Economics, said in a report.

"The beginning of export of home appliances and geographical diversification of cement export to China and Philippines are clear signs of success", said Dawood.

A separate report from the Labor Department on Thursday showed that the US unemployment rate fell to 11.1% in June from 13.3% in May. Shenfeld said "shipping times" from overseas factories may have factored into the drop in imports.

The goods deficit widened to US$76.1 billion, while the services surplus ticked down to US$21.5 billion. The 25% decline in May was the 18 best "growth" rate in May.

"On the one hand, an encouraging rebound to expansionary territory in USA manufacturing sentiment in June bodes well for Canadian firms, especially with the US accounting for a disproportionate share of Canada's exports", Abdelrahman wrote in a report.

Trade balance has improved by $8.7 billion, which shows that the current account deficit is also at manageable levels.

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