The US trade deficit narrowed in April as exports jumped to a record high, a trend that if sustained, puts trade on course to contribute to economic growth this quarter. The smaller trade gap, which was reported by the Commerce Department on Tuesday, partly reflected higher energy prices because of the US-backed war with Iran, which has disrupted shipping in the Strait of Hormuz. Petroleum exports hit a record high in April.
"The good news is that the trade picture is moving into better balance at the start of the second quarter as tariffs keep the growth of imports down relative to surprising strength seen in exports, but the bad news is the export growth looks uncertain, as much of it appears to be the result of higher energy prices from the Iran conflict," said Christopher Rupkey, chief economist at FWDBONDS.
The trade gap contracted 1.2% to $55.9bn, the Commerce Department's Bureau of Economic Analysis and Census Bureau said. Data for March were revised lower to show the deficit at $56.6bn instead of the previously reported $60.3bn.
Economists polled by Reuters forecast the trade deficit would shrink to $56.1bn in April.
Exports increased 2.6% to $327.1bn, an all-time high. Goods exports surged 4.1% to a record $221.3bn. Exports of capital goods increased $4.0bn, boosted by computers and civilian aircraft.
Exports of industrial supplies and materials, which include petroleum, also set an all-time high. Petroleum exports were the highest on record, boosted by higher volumes and oil prices amid the Middle East conflict. The US is a net oil exporter. Consumer goods exports increased $1.7bn.
Imports rose 2.0% to $383.0bn in April. Goods imports advanced 2.1% to $304.9bn. They were lifted by a $7.0bn increase in capital goods, mostly computers, semiconductors and telecommunications equipment, as businesses ramped up investment in artificial intelligence.
But imports of industrial supplies and materials fell $0.9bn. The goods trade deficit contracted 2.8% to $83.7bn. When adjusted for inflation, the goods trade gap narrowed $1.5bn, or 1.8%, to $84.3bn. Trade has been a drag on gross domestic product for two straight quarters.
"The latest trade data bode well for GDP when excluding trade in gold," said Stephen Brown, chief North America economist at Capital Economics.
The Atlanta Federal Reserve's GDP tracking estimate for the second quarter is running at a 3.0% annualised rate. The economy grew at a 1.6% pace in the first quarter.
The goods trade deficit with China decreased $2.6bn to $12.0bn, with both exports and imports declining.
The US had deficits on the goods trade balance with Taiwan, Vietnam, Mexico, the European Union, Canada and Republic of Korea among other nations.
The Trump administration has defended its protectionist trade policy as necessary to address these imbalances. The trade surplus with the United Kingdom dropped $3.8bn to $2.6bn in April, reflecting declines in both exports and imports.
Exports of services fell $0.4bn to $105.8bn in April, pulled down by weakness in travel, transport and maintenance and repair services. But exports of other business services increased. Imports of services shot up $1.3bn to $78.0bn, boosted by transport, travel and insurance services.
