The US trade deficit narrowed by the most in 10 years in April as exports jumped to a record high, suggesting that trade could contribute to economic growth this quarter.
The Commerce Department said on Tuesday that the trade deficit dropped 19.1%, the largest decline since December 2012, to $87.1 billion. Exports of goods and services increased 3.5% to an all-time high of $252.6 billion.
"The big drop back in the trade deficit in April suggests that net trade will be a large boost to second-quarter GDP growth," said Michael Pearce, a senior economist at Capital Economics in New York.
A record trade deficit chopped 3.23 percentage points from gross domestic product in the first quarter, resulting in GDP contracting at a 1.5% annualized rate after growing at a robust 6.9% pace in the fourth quarter. Trade has subtracted from GDP for seven straight quarters.
Growth estimates for the second quarter are as high as a 4.8% annualized rate.
The broad increase in exports was led by shipments of industrial supplies and materials, which hit a record high amid rises in exports of natural gas, precious metals and petroleum products. At $27.2 billion, petroleum exports were the highest on record. Food exports were also the highest on record, with the nation selling $2.1 billion more worth of soybeans.
Capital goods exports increased $1.2 billion to $47.5 billion, the highest since March 2019, with civilian aircraft shipments rising $1.3 billion.
Exports of services increased $2.4 billion to $76.5 billion, lifted by gains in both travel and transport.
Imports of goods and services fell 3.4% to $339.7 billion in April. Imports had been rising rapidly as businesses replenished inventories to meet strong domestic demand.
But with the Federal Reserve raising interest rates to combat inflation, demand is slowing. Inventories of some goods are also close to normal level, reducing the need for imports. The drop in imports could also be the result of shutdowns in China as it battles new Covid-19 infections.
Consumer goods decreased $6.3 billion, amid declines in textile apparel and household goods as well as toys, games and sporting goods. Pharmaceutical preparations also fell. Imports of industrial supplies and materials dropped $5.3 billion, with finished metal shapes plunging $5.6 billion.
Capital goods imports decreased $2.6 billion as computers fell $1.9 billion. But imports of motor vehicles, parts, and engines increased $1.4 billion to an all-time high of $33.7 billion. Food imports were also the highest on record.
April petroleum imports were the highest since October 2014. Imported crude oil averaged $94.99 per barrel in April, the highest since August 2014.
Oil prices have surged in the aftermath of Russia's unprovoked war against Ukraine, which has also driven up prices of other commodities, including wheat and sunflowers.