US trade deficit expands in May due to declining exports

WASHINGTON (Reuters) – The U.S. trade deficit widened for the second consecutive month in May due to a decline in exports, suggesting that trade likely continued to hinder economic growth in the second quarter.

The Commerce Department’s Bureau of Economic Analysis reported on Wednesday that the trade deficit increased by 0.8% to $75.1 billion. April’s data was slightly revised, showing the trade gap rose to $74.5 billion instead of the previously reported $74.6 billion.

Economists polled by Reuters had forecast a deficit increase to $76.2 billion in May.

The goods trade deficit grew by 0.9% to $100.2 billion, the highest since May 2022. Adjusted for inflation, the goods trade deficit rose by 0.5% to $94.5 billion.

Trade detracted from gross domestic product (GDP) in the first quarter, limiting economic growth to an annualized pace of 1.4%. The economy had grown at a 3.4% pace in the October-December quarter. Growth estimates for the second quarter are around 2%.

Exports fell by 0.7% to $261.7 billion in May, influenced by a strong dollar due to the Federal Reserve’s high interest rates and slowing global demand.

Goods exports dropped by 1.7% to $169.6 billion, with notable decreases in industrial supplies and materials, including nonmonetary gold, other petroleum products, and fuel oil. Exports of automotive vehicles, parts, and engines also declined.

However, services exports increased by $1.1 billion to $92.1 billion, driven by travel.

Imports decreased by 0.3% to $336.7 billion. Goods imports fell by 0.8% to $269.7 billion, with consumer goods imports declining, primarily due to a reduction in pharmaceutical preparations. Conversely, imports of cell phones and other household goods rose by $1.0 billion.