US trade gap narrows

THE US trade gap narrowed to $26Bn in May, from $28.8Bn in April, the government said today, with exports rising 1.6% and imports falling 0.6%.

An analysis by IHS Global Insight indicated that most of the improvement came from petroleum. Although oil prices were much higher, oil import volumes plunged.

“The improvement in exports, combined with stability in non-oil imports, is a welcome sign that the headlong decline in world trade volumes has come to an end,” said Nigel Gault, chief US economist for Global Insight.

Gault noted that trade will make a “big positive contribution” to GDP growth in the second quarter, adding roughly 1.5 percentage points to the growth rate.

That growth will be counterbalanced by another big negative contribution from inventories, because much of the decline in imports represents inventory correction.

The overall decline in GDP in the second quarter should be “much shallower” than in the first quarter, Global Insight predicted, noting that trade figures point to a GDP decline of less than 2%.

As a US recovery takes hold, it will mean an increase in imports as US demand recovers. As a result, the trade deficit will probably widen later this year, Gault estimated.

Source: Fairplay