July 6, 2020

Canadian Trade Deficit Shrinks, U.S.’s Gap Expands


  • According to the U.S. Department of Commerce, the nation’s trade deficit was $54.6 billion in May, up $4.8 billion from $49.8 billion in April. May exports were $144.5 billion, $6.6 billion less than April exports. May imports were $199.1 billion, $1.8 billion less than April imports. The May increase in the overall deficit reflected an increase in the goods deficit of $4.2 billion to $76.1 billion and a decrease in the services surplus of $0.6 billion to $21.5 billion. Year‐to‐date, the goods and services deficit decreased $22.3 billion, or 9.1 percent, from the same period in 2019. The Commerce Department also reported last week that foreign investment in the United States fell 37.7 percent in 2019. New foreign investments in the manufacturing sector plunged to $78.2 billion in 2019, from $202.5 billion in 2018. Regionally, the biggest drop showed up in new investment from Europe. That declined to $103.8 billion in 2019, from $228.3 billion in 2018.
  • Canada’s trade deficit narrowed to C$677 million in May 2020 from a revised C$4.3 billion in April 2020, Bloomberg reported last week. Exports were up 6.7 percent while imports fell by 3.9 percent. Exports of auto parts rose significantly, 76 percent, for the month, but are still 20 percent lower than they were in May 2019. Avery Shenfeld, chief economist at Canadian Imperial Bank of Commerce, told Bloomberg, “Trade is the lifeblood of Canada’s goods sector, but even with exports seeing some improvement in May, we’re still a long way from clearing out the clots that emerged in the coronavirus recession.”
  • New orders for manufactured goods in the United States increased $30.5 billion, or eight percent, in May. Shipments rose $12.5 billion, or 3.1 percent, while unfilled orders increased $0.7 billion, or 0.1 percent. Inventories rose $1.1 billion, or 0.2 percent, while the inventories-to-shipments ratio was 1.65, down from 1.70 in April.
  • Canadian gross domestic product fell 11.6 percent in April and 7.5 percent in March. Nathan Janzen, a senior economist with RBC, told the Canadian Press the two-month drop “was four times worse than the peak-to-trough fall during the global financial crisis just over a decade ago.” Manufacturing declined 22.5 percent in April while construction dropped 22.9 percent.
  • The U.S. economy gained 8 million jobs in June, the largest single month gain in history. Manufacturers added 504,000 jobs and the overall unemployment rate fell to 11.1 percent, reflecting a decline of 2.2 percentage points, which is also a historic decline. In related news: during the week that ended June 27, 1.427 million individuals filed for federal unemployment benefits for the first time ever, a decrease from the previous week’s revised level of 1.482 million. That number is in addition to the more than 19 million Americans that continue to receive weekly jobless benefits.
  • In other economic news: U.S. construction spending fell 2.1 percent from April 2020 to May 2020, but was up 0.3 percent from May 2019 to May 2020; the Institute for Supply Management’s manufacturing index rose 9.5 points to 52.6 in June, indicating the sector is in expansion again; and the Conference Board’s Consumer Confidence Index increased from 85.9 in May to 98.1 in June.