In the clearest indication yet that Obama's policies are harming the country and the economy, the US balance of trade showed a $50 billion deficit for May spurred by high oil prices, spurred by a weak dollar and lack of domestic energy production- all policies favored/created by Hurricane O's economic gurus.
The deficit increases the odds that economic growth for the year will have to be revised downward again from 1.9 percent annually, threatening to push the economy into recession territory again.
Watch for the jobs market to sink back into the red. And whatever happens with the budget, don't count on federal revenues to go up.
"Had it not been for a dramatic improvement in the trade deficit in the fourth quarter of 2010, GDP growth would have been over -0.2%, not 3.1%," says Dirk Van Dijk from Zacks Investment Research.
"Unless we see a dramatic turnaround in June, it seems pretty clear that net exports will be a drag on growth in the second quarter. It now looks like the economy will have to be very lucky to match the 1.9% growth rate of the first quarter. The Fed will probably have to again ratchet down its growth expectations for the full year."
The deficit shows three of the key weakness of the Obama administration: Energy policy, Trade policy and Reality.
"May's trade deficit of $50.2 billion was dramatically above April's $43.6 billion (only marginally revised from $43.7 billion) and a market consensus of $44.0 billion," said David Sloan, Economist at IFR Economics according to Reuters. "The deficit is the highest since October 2008. The higher than expected May deficit should be seen alongside a lower than expected April deficit."
Sixty percent of the trade imbalance this time around is from oil imports as prices surged in a low interest rate environment and the extra liquidity brought by QE2.
Despite our president's assertion to the contrary, it’s not our addiction to oil however, that’s caused the problem: Through April oil imports are down year-over-year in 2011.