In its latest report on global trade, the Commerce Department reported this week that America’s cavernous trade deficit widened in May to its highest level in six months.
The U.S. trade deficit rose to $45 billion in May. That’s up more than 12 percent from April and the largest imbalance since November.
Imports rose nearly 2 percent as demand for foreign-made autos and auto parts jumped 3.1 percent to a record of $26 billion in May.
Exports of U.S.-made autos and auto parts also set a record in May of $13.1 billion. But demand for U.S. wheat, soybeans and corn all declined pushing agricultural exports to their lowest level in nearly three years.
And, the impact of a sluggish global economy was confirmed this week when Creighton University Economists reported a key barometer of the rural economy declined in June.
Leading economic indicators for the Midwest declined in June declined for the third straight month according to the Mid-America Business Condition Index. The index, compiled by Creighton University includes data gathered from supply managers and business leaders in nine Midwest states.
Despite the decline, the report projects continued economic growth – albeit slower -- over the next three to six months.
Professor Ernie Goss, Creighton University: “Even though the index is coming down, nothing like what’s going on with the national number, of course a lot going on in agriculture and those businesses tied to agriculture. Even though it is slowing it’s still a lot better than what we see in the national economy and I expect that to continue. We’re likely to see growth slowing in the weeks and months ahead but there’s still going to be positive growth.”
According to the report, a five percent increase in the value of the dollar and slower economic growth in 2013 has lowered inflation at the wholesale level. While prices are not expected to increase in the immediate future, economic optimism has plummeted over the last three months. The majority of supply managers felt that spending cuts and tax increases mandated by the sequester have had little impact on their outlook, but most believe higher interest rates could have profound consequences.
Professor Ernie Goss, Creighton University: “The big impact for this month was the interest rates. A thirty year mortgage rate up significantly. Other interest rates up as well. Of course that’s going to have some impact on the economy and that will be a negative impact on the Mid-American economy. Even with that the construction industry is still growing. Even with these higher mortgage rates I expect the construction industry to continue to expand. And again the cost of buying a house today in America hasn't been this low in many many many years.”
Job growth remains positive but has slowed in the first part of the year to 1 percent compared to 1.5 percent over the same time last year. Regional job growth is expected to remain positive but sluggish.
And, as is always the case in rural America, much of the economic outlook will be determined by commodity prices.
Professor Ernie Goss, Creighton University: “There are some real issues in terms of agricultural commodity prices coming down. A lot of that we can trace to a stronger dollar but also we got record yields out there, record crop coming to the market. That’s going to push prices down and that’s going to have some negative impact on businesses we survey but even with that the agricultural sector by historical standards is still quite strong.”