Thursday, June 16, 2005

May Trade Deficit Forecast: Part I

by Bill McBride on 6/16/2005 06:04:00 PM

Last month I started building a simple model to help forecast the monthly trade deficit. A review of the partial forecast showed some promise.

So here we go for May starting with oil. Using the same model (described here) the ERPP trade numbers for May are forecast to be:

IMPORTS: Energy Related Petroleum Products.
Barrels Crude: 337.9 million barrels.
Barrels Other ERPP: 85.0 million barrels.
DOE Price per barrel (Crude): $43.90
DOE Price per barrel (Other): $50.48

Preliminary - Total NSA ERRP Imports: $19.1 Billion

NOTE: The BLS reports petroleum import prices fell 6.5% in May from April. The above model used DOE prices. After reviewing the prior prices and comparing the DOE and BLS approaches, the DOE has been slightly more accurate. However, I think it might be even better to try to split the difference. The BLS approach would predict P(crude) = $41.85. DOE P(crude) = $43.90. So the modified forecast for Imports NSA is:

BLS/DOE Price per barrel (Crude): $42.88
BLS/DOE Price per barrel (Other): $49.31
Forecast: Total NSA ERRP Imports: $18.7 Billion

Total ERPP FORECAST:
Imports SA: $17.4 Billion (seasonal factor estimated at 0.93 for May)
Exports SA: $1.9 Billion
Balance ERPP: $15.5 Billion