Export Flop Causes U.S. Trade Deficit to Widen to Six-Month Low

Source: Economics Group of Wells Fargo Bank, N.A. Summary U.S. exports slipped by the most since pandemic-related lockdowns in 2020 in April, pushing the U.S. trade deficit to its widest in six months. Some one-off factors are to blame for the weakness, but the data continue to demonstrate an unusual volatility in trade flows. Net exports are tracking to be a meaningful drag on Q2 GDP growth. Continued Volatility in U.S. Trade The U.S. trade deficit widened by a whopping $14.0 billion to $74.6 billion in April, more than reversing the $9.6 billion narrowing a month earlier. Monthly swings of this magnitude in the trade balance are normally very rare, but international trade flows continue to normalize from pandemic effects. Consider that in 11 of the past 20 months the trade balance has moved by $5 billion or more. This month, a broadly weak outturn for exports is to blame. Exports fell $9.2 billion, or by -3.6% in April, while imports rose $4.8 billion (+1.5%). These data were largely foreshadowed by the previously released advance goods trade report, and position net exports to be a meaningful drag on second quarter growth. In the forecast update we published this morning, we estimate net exports will shave 1.4 percentage points off of topline growth in Q2 and these data do not materially change those expectations. Export growth was broadly weak, with every major end-use category declining in April other than the volatile foods & feeds, which would have also posted a negative growth rate had it not been for a pop in soybean exports. Industrial supplies & materials posted the largest decline in exports, falling $6.1 billion (-9.4%) amid pullbacks in crude oil and fuel oil specifically. These two components accounted for over half of the industrial decline, but still only 11 of 47 underlying industrial categories saw exports rise during the month, demonstrating broad weakness in April. Capital goods exports slipped 0.7% and auto exports were down 0.2%. Consumer goods exports also demonstrated weakness broadly, without any one category accounting for the 7.6% decline in exports in April. READ FULL ARTICLE >>