Trade Deficit Widens; Weakness Abroad Fuels Drop in Exports
he 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 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.
Since the middle of last year when the Federal Reserve made clear it was planning to raise interest rates to keep the economy from eventually overheating, the dollar has strengthened, making U.S. exports less competitive.
