Record Exports Help Shrink U.S. Trade Deficit

  • The U.S. trade deficit narrowed by the most in nearly 9-1/2 years in April as exports jumped to a record high, putting trade on course to contribute to economic growth this quarter. The sharp decline reported by the Commerce Department on Tuesday reversed March's surge and suggested that trade could be shifting back to a more normal pattern. The deficit widened, hitting successive all-time highs, as the United States' economy led the recovery from the COVID-19 pandemic global downturn. 
  • "The deficit has widened on trend over the past two years because the U.S. economy has generally grown faster than most of its major trading partners over that period," said Jay Bryson, chief economist at Wells Fargo in Charlotte, North Carolina. "We look for trade to make a modest positive contribution to overall GDP growth in the second quarter.” 
  • The trade deficit dropped 19.1%, the largest decline since December 2012, to $87.1 billion. This is below the expectations of economists polled by Reuters, which had forecast the trade gap shrinking to $89.5 billion. 
  • In April, exports of goods and services increased 3.5% to an all-time high of $252.6 billion. The broad increase was led by shipments of industrial supplies and materials, which hit a record high amid rises in exports of natural gas, precious metals, and petroleum products. Exports of services also increased from $2.4Bn to $76.5Bn, lifted by gains in both travel and transport. 
  • Imports of goods and services fell 3.4% to $339.7 billion. Imports had been rising rapidly as businesses replenished inventories to meet strong domestic demand. However, with the Federal Reserve raising interest rates to combat inflation, demand is slowing. Inventories of some goods are also close to normal levels, reducing the need for imports. The drop in imports could also be the result of shutdowns in China as it battled new COVID-19 infections. Imports from China fell by $10.1 billion, helping to narrow the goods trade gap with Beijing to $34.9 billion from $43.4 billion in March.

(Source: Reuters)