WASHINGTON (Reuters) – The U.S. trade deficit narrowed unexpectedly in May as stronger growth by U.S. trading partners and the weak dollar helped propel exports to record levels, according to government data on Tuesday.
Analysts said the smaller-than-expected trade gap will likely boost second-quarter U.S. economic growth. Meanwhile, a trio of other reports painted a mixed picture of consumer spending trends, a key driver of the U.S. economy.
The May deficit totaled $46.0 billion, well below a median estimate of $48.3 billion from Wall Street analysts surveyed before the report.
The gap narrowed for the first time in six months despite the highest prices for imported oil in nearly 22 years, which helped push overall imports to a record high as well.
Jim Glassman, senior economist with J.P. Morgan Securities in New York, said the report should prompt forecasters to raise estimates of second-quarter growth by “a half a point or so,” depending on the June trade numbers.
Gross domestic product growth was 3.9 percent in the first quarter, and second-quarter estimates from analysts appeared to converge near 4 percent after Tuesday’s data.
U.S. exports jumped nearly 3.0 percent to a record $97.1 billion in May, as overseas companies stepped up purchases of capital goods and industrial materials ranging from civilian aircraft and industrial engines to computers and drilling equipment. Exports of autos and parts also set a record.
The data boosted the dollar against other major currencies and pushed gold prices lower. Treasury bond prices eased on expectations for stronger economic growth.
Strong U.S. consumer demand sucked in record levels of auto and auto parts imports and also sent imports of food, beverages and animal feeds to a new high.
A separate report showed consumers are increasingly optimistic about the U.S. economy.
Investor’s Business Daily and TechnoMetrica Market Intelligence said their economic optimism index rose in July to 57.3 from 52.8 in June. A reading above 50 indicates optimism.
The six-month outlook — how consumers feel about the economy’s potential in the next half year — gained 4.9 points to 57.1.
The gauge is based on more than 1,000 interviews during the first week of July, and foreshadows the widely watched University of Michigan survey — due Friday — along with the Conference Board’s consumer sentiment index.
But two other reports on Tuesday showed U.S. chain store sales were anemic last week, as unseasonable weather cooled demand for summertime items.
Sales growth remained steady last week, compared with the 0.9 percent increase in the previous week, the International Council of Shopping Centers and UBS said in a joint report.
But compared with the same week a year ago, sales increased 3.4 percent, slowing sharply from the 4.4 percent growth pace of the preceding week, the survey found.
A second report by Redbook Research showed sales at major retailers slipped 0.5 percent so far in July compared with all of June.
The dollar’s weakness in recent years has fueled a rebound in exports from a low of $77.0 billion in September 2001.
“The perfect storm of an overvalued dollar and sluggish world demand that significantly eroded our exports has largely passed,” Jerry Jasinowski, president of the National Association of Manufacturers, said in a statement. “(The report) shows clearly that the export recovery is gaining significant momentum.”
The steady export growth is also an indication that other major economies are doing better, analysts said.
“You’re looking at a window of picture of global activity, We know U.S. growth is strong, the economy’s rebounding,” Glassman said. “Rising exports are a good sign trading partners (are) moving ahead as well.”
Despite the smaller monthly trade gap, the deficit remained on track to surpass last year’s record of $496.5 billion. In the first five months of this year, the trade gap has soared to $231.0 billion from $208.7 billion in the same period last year.
U.S. imports increased fractionally in May to a record $143.1 billion, aided by a record $10.5 billion oil import bill. U.S. imports from OPEC countries hit a record $7.4 billion and the trade gap reached a record $5.6 billion.