US merchandise-trade deficit narrows to smallest in 2021

The US merchandise-trade deficit narrowed to its smallest this year in May, as exports rose to a new record, suggesting a tailwind for economic growth in the second quarter.

Commerce Department data showed that the shortfall fell by 2.2% to $104.3 billion last month. The figures, which aren't adjusted for inflation, are compared to the median estimate for a gap of $104.8 billion in a Bloomberg survey of economists.

Exports rose by 1.2% to $176.6 billion, while imports were little changed.

Aggressive lockdowns by the Chinese government to curb the spread of Covid 19 in April started easing a month later, illustrating an otherwise complicated near-term trade picture. Beijing's measures have strained already tenuous global supply chains, coupled with Russia's war in Ukraine.

The logistics networks are a concern for US retailers and manufacturers as they try to increase stockpiles in order to meet robust demand. The risk is that sales of merchandise weaken more than predicted as consumers spend more on services.

In May, retail inventories rose 1.1% to $705.3bn from a month earlier, as companies stock up on merchandise amid still uncertain supply chains. Stocks at wholesalers went up 2%.

The US's busiest container-handling ports of Los Angeles and neighboring Long Beach on the West Coast moved near-record cargo volumes in May. The directors forecast strong cargo arrivals for June and July, as retailers look to avert future supply-chain snarls to make seasonal goods specific to the second half of the year - such as back-to school items in time.

The economy's worst performance since thepandemic began in the first quarter, with gross domestic product shrinking an annualized 1.5%, due to the widening of the trade deficit. The trade gap has narrowed significantly since the beginning of the second quarter.

Exports were boosted by gains in industrial supplies, such as petroleum products, as well as increases in the value of shipments of consumer goods and motor vehicles.

In May, US merchandise imports decreased by 0.1% from the previous month to $280.9 billion. Inbound shipments of consumer goods dropped 2.4%, while imports of industrial supplies rose 2.2%.

More complete May trade figures that include the balance on services will be released on July 7.

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