US Trade Deficit Widens as Exports Drop

The U.S. trade deficit widened in May, fueled by a drop in exports that could heighten concerns over weak overseas demand and a strong U.S. dollar.

The Commerce Department reported on Tuesday that the trade gap grew $1.2 billion to $41.9 billion. That was less than the $42.6 billion deficit expected by analysts and suggests Wall Street economists may slightly raise their forecasts for economic growth in the second quarter.

But the drop in exports in May highlights a change in the tenor of economic growth since the United States exited the 2007-2009 recession. The economy relied more on export-led industries such as manufacturing early in the recovery, but growth is increasingly coming from domestic drivers like construction and services as the economic cycle matures.

Exports fell $1.5 billion, or 0.8 percent, to $188.6 billion in May, led by a drop in overseas sales of U.S.-made capital goods. Imports fell by about $300 million, or 0.1 percent, to $230.5 billion.

Prices for U.S. Treasuries rose after the data, while U.S. stock index futures were unchanged. The dollar gained against a basket of currencies.

via Reuters

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza