Muted Reaction to PPI, Trade Data

Neither report had any worrisome news for the market.
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The U.S. trade deficit and producer price index reports released on Friday held no huge surprises and were largely ignored by the market.

The Census Bureau reported a relatively flat May goods and services deficit of $41.8 billion, $200 million above April's revised $41.6 billion deficit. Analysts had expected a deficit of $41.5 billion. In May 2002, the total deficit was $35.1 billion.

Total May exports were $82.1 billion and imports came to $123.9 billion. For the three months that ended in May, the average trade deficit was $42.1 billion.

The goods deficit was $46.8 billion, up $400 million from April. Increases in capital goods, automotive parts and industrial supplies and materials accounted for the April to May change in goods exported, while imports were hurt by decreases in foods, feeds and beverages. Consumer goods were essentially unchanged.

Meanwhile, the services surplus was up $200 million from April to $4.9 billion. Exports increased $400 million, helped by an increase in travel and passenger airline fares, which partially offset a decrease in other transportation. Services imports rose $100 million.

Separately, the producer price index was on the rise for the second month in a row after dropping drastically in April. It rose 0.5% in June, according to the Labor Department, compared with analysts' expectations of a 0.3% increase.

The Labor Department cited higher oil prices for the increase. Finished energy goods climbed 3.4% during the month after a 2.6% decline in May.

June's increase compares with a 0.3% rise in May and a 1.9% drop in April. The core index, which excludes food and energy, fell 0.1%, while analysts had expected an increase of 0.1%. In May, the core index rose 0.1%.