Wider Trade Gap May Signal Drag on Second-Quarter Growth
U.S. demand for foreign-made goods climbed and exports declined, causing the trade deficit to widen in April, which may restrain the pace of economic growth this quarter, Commerce Department data showed June 2.
Highlights of Trade Balance
• Gap increased 5.2% to $47.6 billion (forecast was $46.1 billion) from a revised $45.3 billion in March.
• Exports dropped 0.3% to $191 billion, restrained by autos and consumer goods.
• Imports rose 0.8% to $238.6 billion on consumer goods, capital equipment.
• Merchandise-trade deficit climbed to $68.4 billion, the second-widest in two years.
Key Takeaways
A wider gap in merchandise trade that persists would limit any rebound in economic growth this quarter after a slowdown at the start of 2017. Trade contributed little to first-quarter growth after subtracting 1.82 percentage points in the final three months of 2016, according to the government’s figures on gross domestic product.
The trade figures also include the Commerce Department annual revision for 2014 through 2016. The goods and services trade deficit was revised up 0.8% for last year after minimal changes to 2014 and 2015.
Economist Views
Inflation-adjusted exports are “on course for annualized growth of only around 1% for the second quarter as a whole, compared to a likely gain of closer to 3% annualized for real imports,” Andrew Hunter, an economist at Capital Economics, wrote in a note. “Nonetheless, the headwind from the dollar’s prior appreciation has now faded, and the survey data still suggest that real export growth should pick up again before long.”
Other Details
• After eliminating the effects of price fluctuations, which generates the numbers used to calculate GDP, the gap grew to $63.5 billion from $60.7 billion.
• April imports of capital goods were the highest in two years.
• Excluding petroleum, the merchandise deficit reached $61.7 billion, the highest since March 2015.
