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US Trade Gap Widens to Largest in 18 Months

June 6, 2024
U.S. consumption has been more resilient than anticipated even as the central bank rapidly hiked interest rates to dampen demand.

The U.S. trade deficit expanded slightly less than analysts expected in April, to the widest since late 2022, as imports rose more quickly than exports, according to government data released Thursday.

The overall gap was $74.6 billion, growing from March's revised $68.6 billion figure, said the Commerce Department.

This was the largest deficit since October 2022, according to official data.

U.S. consumption has been more resilient than anticipated even as the central bank rapidly hiked interest rates to dampen demand -- this has helped to support imports.

But with weaker global demand, there have been concerns that export growth would not be able to keep up.

Investors are also watching the Federal Reserve for the outcome of its policy meeting next week, looking for hints on when it might start cutting interest rates.

"The early data are pointing to a drag from trade in the second quarter," said Rubeela Farooqi, chief U.S. economist at High Frequency Economics.

In April, imports grew by 2.4% to $338.2 billion, while exports rose by 0.8% to $263.7 billion, said the Commerce Department.

The jump in imports was largely due to an increase in goods such as automotive vehicles, the report added.

Goods exports, meanwhile, also picked up but by a smaller degree, with a rise seen in products like pharmaceutical preparations and electric apparatus, data showed.

"Imports have been supported by strong domestic demand and lean inventories," said Matthew Martin, U.S. economist at Oxford Economics.

"Exports have contended with a weaker global backdrop and a strong dollar which makes domestic goods relatively more expensive abroad," he added.

The goods deficit with China, a point of contention in U.S.-China competition, dropped by $2.5 billion to $22.1 billion in April. This was mainly due to a decrease in imports.

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