US merchandise-trade deficit shrinks on decline in imports

THE US merchandise-trade deficit shrank in May by more than expected, as the value of imports slid by the most in six months.

The shortfall in goods trade narrowed 6.1 per cent to US$91.1 billion, Commerce Department data showed Wednesday (Jun 28). The figure, which was not adjusted for inflation, compared with a US$93.7 billion median estimate in a Bloomberg survey of economists.

Imports fell 2.7 per cent to about US$254 billion, also the lowest since November; the decline was led by a drop in consumer goods. Exports dropped 0.6 per cent to US$162.8 billion, reflecting a decrease in outbound shipments of food and industrial supplies.

Though a narrowing of the trade deficit for most of 2022 proved to be a key tailwind to GDP last year, economists do not expect net exports to provide that kind of support again in the near term. The pace of import growth will depend on consumer and business demand, which has so far proved resilient.

Meanwhile, foreign purchases of US-made goods have eased in recent months, as the global economy cools in the face of higher borrowing costs.

US auto exports jumped 8.7 per cent in May, the most since the start of the year, while outbound shipments of consumer goods rose 4.3 per cent.

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Prior to Wednesday’s trade figures, the Atlanta Fed’s GDPNow forecast had net exports subtracting 0.7 percentage point from second-quarter GDP.

The Commerce Department report showed that retail inventories rose 0.8 per cent last month, the most this year, to US$778.7 billion. Inventories at car dealers jumped 2.9 per cent, the biggest gain since August. Stockpiles at wholesalers fell 0.1 per cent to the lowest level since September.

More complete May trade figures that include the balance on the services account are due on Jul 6.