Consumer services

US trade deficit narrows sharply as exports hit record high

Ships and shipping containers are pictured at the Port of Long Beach in Long Beach, California, U.S., January 30, 2019. REUTERS/Mike Blake

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  • Trade deficit drops 19.1% to $87.1 billion in April
  • Exports increase by 3.5%; imports fall by 3.4%

WASHINGTON, June 7 (Reuters) – The U.S. trade deficit narrowed the most in 10 years in April as exports hit a record high, suggesting trade could help economic growth this quarter.

The Commerce Department said Tuesday that the trade deficit fell 19.1%, the biggest drop since December 2012, to $87.1 billion. Exports of goods and services rose 3.5% to an all-time high of $252.6 billion.

“The sharp decline in the trade deficit in April suggests that net trade will significantly boost GDP growth in the second quarter,” said Michael Pearce, senior economist at Capital Economics in New York.

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A record trade deficit cut 3.23 percentage points from gross domestic product in the first quarter, causing GDP to contract at an annualized rate of 1.5% after rising at a healthy 6.9% % in the fourth quarter. Trade has subtracted from GDP for seven consecutive quarters.

Growth estimates for the second quarter reach an annualized rate of 4.8%.

The broad-based increase in exports was led by shipments of industrial supplies and materials, which hit a record high amid rising exports of natural gas, precious metals and petroleum products. At $27.2 billion, oil exports were the highest on record. Food exports were also the highest on record, with the country selling $2.1 billion more in soybeans.

Exports of capital goods rose $1.2 billion to $47.5 billion, the highest level since March 2019, as deliveries of civil aircraft rose $1.3 billion.

Services exports rose $2.4 billion to $76.5 billion, boosted by gains in travel and transportation.

Imports of goods and services fell 3.4% to $339.7 billion in April. Imports had risen rapidly as businesses restocked to meet strong domestic demand.

But with the Federal Reserve raising interest rates to fight inflation, demand is slowing. Stocks of some goods are also close to normal levels, reducing the need to import. The fall in imports could also be the result of shutdowns in China as it battles new COVID-19 infections.

Consumer goods fell $6.3 billion, driven by declines in textile apparel and household goods as well as toys, games and sporting goods. Pharmaceutical preparations have also declined. Imports of industrial supplies and materials fell $5.3 billion, with finished metal shapes plunging $5.6 billion.

Imports of capital goods fell $2.6 billion, while computers fell $1.9 billion. But imports of motor vehicles, parts and engines rose $1.4 billion to a record high of $33.7 billion. Food imports were also the highest on record.

April oil imports were the highest since October 2014. Crude oil imports averaged $94.99 a barrel in April, the highest since August 2014.

Oil prices jumped following Russia’s unprovoked war on Ukraine, which also pushed up the prices of other commodities, including wheat and sunflower.

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Reporting by Lucia Mutikani; Editing by Andrew Heavens and Chizu Nomiyama

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