U.S. trade gap in May was narrowest this year


The news: The U.S. international trade deficit narrowed 1.3% in May to $85.5 billion, the Commerce Department said Thursday.

Economists surveyed by The Wall Street Journal had predicted the deficit would widen to a seasonally adjusted $84.9 billion. 

This is the smallest trade deficit since December’s $78.9 billion gap.

The trade deficit has narrowed for two straight months after hitting a record $107.7 billion in March.

Key details: Exports rose 1.2% to a record $255.9 billion in May, the fourth straight monthly gain,

Imports rose 0.6% to $341.4 billion but remained below March’s record high.

Adjusted for inflation, the real goods deficit increased slightly to $116.6 billion in the month.

Big picture: The easing of the trade deficit will provide a decent boost for GDP growth in the April-June quarter.

The U.S. consumer has been the buyer of last resort for foreign goods throughout the pandemic. If U.S. consumer demand slows as the Fed tightens monetary policy, it will be another headwind for the global economy.

Looking ahead: “The recent moderation in import growth, combined with strong headwinds facing exports given rising fragility in the world economy, suggests domestic and global trade flows will slow further in the months ahead,” said Mahir Rasheed, U.S. economist at Oxford Economics.

Market reaction: Stocks DJIA, +0.91% SPX, +1.37% were set to open higher on Thursday, led by the tech sector.

This article was originally published by Marketwatch.com. Read the original article here.

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