Headlines can be deceiving.
On first blush, the latest U.S. trade data looks pretty bad. The country purchased imports in May worth $50.2-billion more than the stuff it shipped abroad. That's the widest deficit in three years and bigger than any of the 73 Wall Street analysts surveyed by Bloomberg News had predicted.
The Commerce Department report is further evidence that the U.S. economy lost momentum at the start of the second quarter. But it also shows that the country's main economic engine remained engaged despite the drag from higher commodity prices and disruption from Japan's natural disaster.
America's trade gap widened so dramatically because a barrel of crude oil cost an average $108.70 in May, the most since August, 2008. The surge in the price of oil accounted for two-thirds of the jump in the value of imports, according to Capital Economics. Oil prices have declined considerably since May, meaning this effect will be reversed when Commerce gets around to reporting June figures next month.
The consistent strength in an otherwise faltering U.S. recovery is exports. International shipments of goods and services declined by about $1-billion (U.S.) in May. Yet the total -- $174.8-billion - is the second-biggest ever after a record $175.8-billion in April.
In July, 2008, the value of U.S. exports peaked at $165.9-billion. The country exceeded that total for five consecutive months through May. Aided by a weaker dollar, American companies are making an aggressive push into international markets. (Canada is one of those markets. Imports from the U.S. were 4.8 per cent higher in May from a year ago, Statistics Canada reported Tuesday. Canada's exports to the U.S. were 6.4 per cent higher over the same period.
They're earning more abroad than ever, providing ballast as the U.S. economy struggles to recovery from the recession.
Despite the May number, most economists predict trade will add a positive contribution to gross domestic product in the second quarter. That makes trade the only thing that is keeping the U.S. economy going. "Without this, the economy might have ground to complete halt," Paul Dales, senior U.S. economist at Capital, said in a note.