U.S. trade deficit narrows in May, net exports likely to contribute to Q2 GDP growth

The U.S. trade deficit rebounded in the month of May. Trade deficit narrowed to USD 43.1 billion in May from April’s USD 46.1 billion, the smallest deficit since October 2016. Nominal exports grew 1.9 percent, led by food and beverage exports, which were up a strong 14.1 percent. Imports rose 0.4 percent, after two months of declines.

Capital goods recorded the strongest import growth, rising 3.6 percent, countered by falling automotive and consumer goods imports. Real goods exports rose 1.7 percent, while real goods imports rose 0.2 percent.

Tariffs and the threat of tariffs are already distorting international trade figures as businesses try to get ahead of the trade action, noted TD Economics in a research report.

“With a strong gain in exports and weak import growth, net exports look to add at least a percentage point to second quarter real GDP growth, enough to push it past the 4 percent mark. Import weakness is unlikely to last, given the strength in domestic spending and a strong U.S. dollar, and some of the recent export strength is likely to reverse as trade barriers come into effect”, added TD Economics.

At 17:00 GMT the FxWirePro's Hourly Strength Index of US Dollar was highly bearish at -131.219. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex