US trade deficit narrows as imports of merchandise decline
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THE US trade deficit shrank in May as the value of imported merchandise declined to the lowest level since October 2021.
The shortfall in goods and services trade declined by US$5.5 billion, or 7.3 per cent from a month earlier, to US$69 billion, Commerce Department data showed on Thursday (Jul 6).
The figures aren’t adjusted for inflation. The gap matched the median estimate in a Bloomberg survey of economists.
The value of goods and services imports declined 2.3 per cent, led by decreases in consumer goods and industrial supplies. Total exports fell 0.8 per cent, led by a drop in shipments of food and feeds such as soybeans.
Demand for foreign goods is easing as American consumers temper their spending on goods in favour of services and experiences. The drop in inbound shipments suggests US firms are focused on getting inventories more in line with sales.
A separate government report out last week showed inflation-adjusted spending has essentially stalled in recent months as households feel the pinch from high prices and borrowing costs.
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Though a smaller deficit may have contributed to economic growth in the second quarter, economists don’t expect trade to provide the same support to the economy as in past years as demand abroad also eases.
On an inflation-adjusted basis, the merchandise trade deficit fell to US$89.2 billion in May.
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