The US trade deficit widened by the most in eight years in April as imports of goods rebounded while exports of energy products declined, a trend that if sustained, could result in trade being a drag on economic growth in the second quarter.
The trade deficit jumped 23.0 per cent to US$74.6 billion, the Commerce Department said on Wednesday (June 7). The sharpest percentage increase since March 2015 raised the deficit to the highest level in six months.
Data for March was revised to show the trade gap narrowing to US$60.6 billion instead of US$64.2 billion as previously reported. The government revised the goods trade data from 2018 while the trade services figures were revised from 2017.
“The terms of trade are worsening and this will bring down second-quarter estimates of real GDP growth closer to the one per cent stall speed where bad things can happen and the economy can stumble and go over the cliff,” said Christopher Rupkey, chief economist at FWDBONDS in New York.
Trade made no contribution to the economy’s 1.3 per cent annualised growth rate in the first quarter after adding to gross domestic product for three straight quarters. Growth estimates for the second quarter are currently converging around a two per cent pace.
Goods imports rose two per cent to US$263.2 billion in April, boosted by motor vehicles, parts and engines. There were also increases in imports of industrial supplies and materials, though petroleum imports fell to the lowest level since August 2021.
Consumer goods surged US$1.8 billion, driven by cellphones and other household goods. Food imports were the lowest since December 2021. Imports of services decreased US$0.4 billion to US$60.4 billion, weighed down by declines in transport and travel. Overall imports increased 1.5 per cent to US$323.6 billion.
Exports of goods plunged 5.3 per cent, the most in three years, to US$167.1 billion. That was the lowest level since February 2022.
Exports are being crimped by slowing global demand. Though the dollar has given up some gains this year in the wake of 500 basis points worth of interest rate increases from the Federal Reserve since March 2022, the greenback remains strong, making US-made goods less competitive on the global market.
April’s drop in goods exports was led by a sharp decline in exports of industrial supplies and materials, mostly crude oil and fuel oil. Exports of industrial supplies and materials, which include petroleum, were the lowest since November 2021.
There was also a big decline in exports of consumer goods. Exports of services, however, increased $0.2 billion to a record US$81.9 billion, lifted by travel and other business services.
But exports of financial services and government goods and services fell. Overall exports fell 3.6 per cent, the largest decline in three years, to US$249.0 billion.
That was the lowest level since March 2022. The services surplus was the highest since March 2021. Adjusted for inflation, the goods trade deficit shot up 16.5 per cent to US$95.8 billion in April.