The US trade deficit grew in April on a pullback in exports, bringing the gap to its widest since October 2022, according to government data released on Wednesday.
Although the country’s imports have been boosted by resilient consumer spending, analysts expect this trend to weaken as well going forward, while tighter lending conditions weigh on investments.
The anticipation is that trade could bring negative growth to gross domestic product in the second quarter of the year.
In April, the overall trade deficit was $74.6 billion, expanding slightly less than expected by $14 billion, according to Commerce Department data.
Exports fell by $9.2 billion to $249 billion in the month, while imports edged up by $4.8 billion to $323.6 billion.
“Net foreign trade often is sidelined in discussions of headline GDP growth, but it has been a huge swing factor since Covid,” said Pantheon Macroeconomics economists Ian Shepherdson and Kieran Clancy in a recent report.
They added that weakening in foreign trade will likely be “accompanied by a further drag from the inventory component, and a steep drop in investment in business equipment, making an outright drop in headline GDP more likely.”
The slide in exports came on the back of a decrease in value of goods shipments, such as crude oil and fuel oil, along with some consumer goods.
Imports of goods picked up with support from auto vehicles and parts, as well as some industrial supplies and materials.
But imports are likely to weaken in the months ahead, according to economist Matthew Martin of Oxford Economics in a recent note, citing “a mix of declining consumer strength and a wave of destocking by businesses.”
The US goods deficit with China stood at $24.2 billion in April.