US Trade Deficit Shrinks. The United States recorded a shrinking trade balance deficit in May 2023, driven by the value of imports which fell to the lowest level since October 2021. The US Department of Commerce reported a trade balance deficit of US$69 billion in May, down 5.5 billion or 7.3 percent compared to previous month.
This trade balance data is not adjusted for inflation. The value of imports of goods and services fell 2.3 percent to US$316.1 billion, led by a decline in industrial consumption and supply. Exports fell 0.8 percent to a level of US$247.1 billion, led by a decrease in shipments of food and animal feed such as soybeans.
Demand for foreign goods is reduced as US consumers reduce their spending on goods in favor of boosting the service sector. The decline in exports suggests that US companies are focusing on making inventories more in line with sales.
A separate government report released last week showed that inflation-adjusted spending had essentially stalled in recent months as households felt the pressure from high prices and rising interest rates.
Even though the deficit eased and contributed to Uncle Sam’s economic growth in the second quarter of 2023, economists do not expect the trade sector to provide the same support to the economy as in previous years because external demand has also declined.
US Trade Deficit Shrinks. On an inflation-adjusted basis, the goods trade balance deficit narrowed to US$89.2 billion in May. Meanwhile, the US goods trade balance deficit with China shrank to its lowest level since October 2022.