U.S. Trade Deficit Narrows While Canadian Gap Widens

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Meanwhile, here are the major economic headlines from the last week:

• The U.S. trade deficit shrank by a record amount in April 2025, falling by 55 percent to $61.6 billion from $140 billion from March. April exports were $289.4 billion, $8.3 billion more than March exports, while April imports were $351 billion, $68.4 billion less than March imports. The April decline in the goods and services deficit reflected a drop in the goods deficit of $75.2 billion and an increase in the services surplus totaling $1.5 billion. Year-to-date, the goods and services deficit was up $179.3 billion, or 65.7 percent, from the same period in 2024.
• Canada’s merchandise trade deficit with the world widened from $2.3 billion in March to $7.1 billion in April due partly to a significant drop in auto shipments to the United States. It was the country’s largest trade deficit on record. More specifically, merchandise exports fell 10.8 percent, while imports fell 3.5 percent. Exports to the United States were down 15.7 percent.
• New orders for U.S. manufactured goods fell 3.7 percent in April to $594.6 billion while shipments decreased 0.3 percent to $598.9 billion. Unfilled orders, which had risen 11 of the last 12 months, were up $0.7 billion. The unfilled orders-to-shipments ratio was 6.77, down from 6.86 in March. Inventories fell 0.1 percent to $943.6 billion while the inventories-to-shipments ratio was 1.58, up from 1.57 in March.
• The S&P Global Canada Manufacturing Purchasing Managers’ Index (PMI) rose to 46.1 in May from 45.3 in April, but was below the 50 level that signifies contraction for the fourth straight month. The employment component fell to 44.9 from 47.6 in April, marking its lowest level since June 2020. Measures of output and new orders also remained in contractionary territory. U.S. manufacturing growth continued in May, meanwhile. The S&P Global U.S. Manufacturing PMI rose to 52, up from 50.2 in April. Underlying indexes suggest the jump may have been due to a temporary demand surge, however. Read that report at this link. Additionally, the Institute for Supply Management’s PMI for the United States fell to 48.5 percent in May from 48.7 percent in April, indicating a third consecutive month of contraction in the manufacturing sector. Read that report at this link.
• S. construction spending fell 0.4 percent between March 2025 and April 2025 and 0.5 percent between April 2024 and April 2025. Read the full report at this link.
• S. employers added 149,000 jobs in May while the country’s unemployment rate held steady at 4.2 percent. Manufacturers shed 8,000 jobs and average workweek in the industry was little changed at 40.1 hours. Read the full report at this link. In other employment news: the U.S. government said there were 7.4 million jobs left unfilled in the country in April.
• Canadian employers added just 8,000 jobs in May, Statistics Canada announced last week. Additionally, the country’s unemployment rate increased to its highest level in almost nine years, excluding the peak of the COVID-19 pandemic. That metric rose to seven percent from 6.9 percent in April; there were 1.6 million jobless people in the country. The total number of unemployed Canadians in May was almost 14 percent higher than a year ago. Read the full report at this link.
• U.S. business sector labor productivity fell 1.5 percent between the last quarter of 2024 and the first quarter of 2025 due to a 0.2 percent decline in output and a 1.3 percent increase in hours worked. Last quarter marked the first time labor productivity has fallen since the second quarter of 2022. Between the first quarter of 2024 and the first quarter of 2025, labor productivity was up 1.3 percent. In the manufacturing industry, the story was different. Labor productivity in manufacturing rose 4.4 percent, the most significant increase in nearly four years, with output advancing 4.8 percent and hours worked only increasing 0.4 percent.
• The number of people who applied for U.S. unemployment benefits for the first time ever was 247,000 during the week that ended May 31. That number was up 8,000 from the week before. Averaged over the past four weeks, the number of first-time claims was 235,000, an increase of 4,500 from the previous week. In all, nearly 1.904 million people claimed federal unemployment benefits during the week that ended May 24. That figure was down by 3,000 from the week before.