Merchandise Trade Gap, Inventories May Weigh on U.S. Growth

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The second-widest U.S. merchandise trade deficit in two years and an April drop in inventories at wholesalers and retailers may weigh on the economy this quarter, according to preliminary figures Thursday from the Commerce Department in Washington.

Highlights of Advance Trade and Inventories (April)

  • Goods trade gap widened to $67.6b (forecast $64.5b) from $65.1b the prior month
  • Wholesale inventories decreased 0.3% m/m, most since Nov. 2015 (forecast 0.2% rise)
  • Retail stockpiles also fell 0.3% last month

Key Takeaways

A wider gap in merchandise trade that persists would limit any rebound in economic growth this quarter after a slowdown at the start of 2017. Exports declined in April, while imports rose. What’s more, March gains in wholesale and retail inventories were less than previously reported.

Economists look to the advance report on trade and inventories -- the two most volatile parts of the calculation for gross domestic product -- to gin up forecasts for quarterly growth. Stephen Stanley, chief economist at Amherst Pierpont Securities, shaved his second-quarter GDP tracking estimate to 3.4 percent from 3.7 percent after the figures.

Trade contributed little to first-quarter growth after subtracting 1.82 percentage points in the final three months of 2016, according to the government’s figures on gross domestic product. Inventories subtracted 0.93 percentage point in the first quarter.

Other Details

  • Exports of goods fell 0.9 percent in April from the previous month; imports rose 0.7 percent
  • Outbound shipments were depressed by a 7.5 percent slump in motor vehicles and a 4.1 percent drop in consumer goods
  • Imports of consumer merchandise, food and capital goods increased in April
  • Inventories at motor vehicles and parts dealers fell 0.5 percent; excluding autos, retail stockpiles were down 0.2 percent
  • Wholesale inventories of durable goods fell 0.2 percent; stocks of nondurable goods declined 0.6 percent
  • Exports and imports of goods accounted for about three-fourths of America’s total trade in 2016; the U.S. typically runs a deficit in merchandise trade and a surplus in services
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