story from Bloomberg News
The trade deficit in the U.S. narrowed in May as falling crude oil prices and weakening demand for consumer goods trimmed the import bill.
The gap shrank 3.8% to $48.7 billion, in line with the median estimate of economists surveyed by Bloomberg News, from $50.6 billion in April, according to Commerce Department figures released Wednesday (July 11). Purchases from abroad fell to the lowest level in three months, while exports climbed to the second- highest on record.
Slowing global growth, which led central banks from Europe to China to cut interest rates and announce more stimulus on July 5, may mean purchases of American-made goods will cool. At the same time, a lack of U.S. hiring that helped prompt the Federal Reserve to ease monetary policy last month may temper household spending, translating into waning demand for foreign goods.
“The trade deficit will drift slightly lower because of the decline in the price of oil,” said Jay Bryson, senior global economist at Wells Fargo Securities LLC in Charlotte, N.C., who was the only analyst to correctly project the trade outcome. “Exports are holding up, but as we go forward we are going to see pretty weak numbers given the slowdown abroad. Our economy has slowed as well. Import growth has definitely softened.”
The Commerce Department revised the trade deficit for April from an initially reported $50.1 billion. Imports dropped 0.7% to $231.8 billion, the fewest since February, from $233.3 billion the prior month. Demand for crude oil plunged by $2.82 billion in May, while purchases of foreign-made consumer goods like cell phones and clothing decreased by $375 million.
Excluding petroleum, the trade shortfall widened to $23.8 billion from $22.5 billion in April.
There were some exceptions to the glum reading on imports. There was a $1.42 billion increase in imports of capital equipment like computers and telecommunications gear that indicates business investment in the U.S. is holding up. Auto and parts imports, which is a separate category from consumer goods, also climbed to a record.
Exports increased 0.2% to $183.1 billion, boosted by sales of food and capital equipment.
The trade gap with the European Union was the biggest since July 2008 as U.S. imports from the region jumped more than exports, perhaps starting to reflect the recent drop in the value of the euro. The deficit with South Korea was the biggest since November 2004.
The trade gap with China widened to $26 billion from $24.6 billion in April. Data this week indicated it may keep growing. The trade deficit with China may remain a thorny issue as the U.S. presses it to allow its currency, the yuan, to rise against the dollar and improve access to its market. President Barack Obama this month expanded trade complaints against China, accusing the nation of imposing unfair taxes on American vehicles, mostly from General Motors Co. and Chrysler Group LLC.