US trade deficit narrows on record petroleum and capital goods exports
The Commerce Department reports a 1.2% contraction in the trade gap to $55.9 billion, driven by soaring energy revenues and AI infrastructure spending.
The United States trade deficit contracted by 1.2 per cent in April to $55.9 billion, according to data released by the Commerce Department’s Bureau of Economic Analysis and Census Bureau. The improvement was primarily driven by a surge in petroleum exports, which reached a record $36.7 billion, up from $27.6 billion in March. This increase was attributed to higher volumes and elevated oil prices linked to the ongoing US-backed conflict with Iran, which has disrupted shipping in the Strait of Hormuz.
Goods exports surged 4.1 per cent to a record $221.3 billion, while overall exports rose 2.6 per cent to $327.1 billion. The petroleum trade surplus swelled to a record $17.7 billion, supporting a broader rise in industrial supplies and materials exports to $89.0 billion. Christopher Rupkey, chief economist at FWDBONDS, noted that while the trade picture is improving, the growth appears uncertain as much of it stems from higher energy prices rather than volume increases.
Conversely, imports rose 2.0 per cent to $383.0 billion, with capital goods imports hitting a record high of $70.3 billion. This spike was fueled by increased spending on computers, semiconductors, and telecommunications equipment for artificial intelligence infrastructure. Sal Guatieri, a senior economist at BMO Capital Markets, observed that soaring oil exports are narrowing the trade gap, with tariffs playing a more minor role in slowing imports than previously anticipated.
The narrowing trade balance suggests potential upside risk to second-quarter gross domestic product growth estimates. Stephen Brown, chief North America economist at Capital Economics, stated that the data bodes well for GDP when excluding trade in gold. The Atlanta Federal Reserve’s GDP tracker currently estimates a 3.3 per cent annualised growth rate for the quarter, up from 1.6 per cent in the first quarter.
Despite the positive trade data, broader economic pressures remain. The average 30-year fixed mortgage rate has increased by approximately 50 basis points since the conflict began, driven by rising Treasury yields and inflation concerns. The Consumer Price Index is expected to have risen 4.2 per cent year-on-year in May, the largest gain since April 2023. Meanwhile, existing home sales jumped 3.2 per cent in May, but analysts warn that elevated mortgage rates and tight inventory continue to cast a shadow over the housing sector.
