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PNC Senior Economist Abbey Omodunbi: Trade Deficit Rises Sharply to Six-Month High in April;

Michigan Business Network
May 26, 2023 1:00 PM

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Trade Will Likely Be Modestly Negative for Growth in the Second Quarter
  • The U.S. goods trade deficit rose sharply in April to $96.8 billion from $82.7 billion in March, according to the advance estimate from the U.S. Census Bureau.
  • Easing supply chains should help automotive exports in the near term.
  • PNC forecasts trade to be modestly negative for GDP growth in the current quarter.

The advance nominal-goods trade deficit widened sharply in April to a six-month high. It widened $14.1 billion in April to $96.8 billion from $82.7 billion in March, according to data from the U.S. Census Bureau. This was worse than the consensus expectation for a slight narrowing to $85.9 billion. Exports fell 5.5% in April from the prior month while imports rose 1.8%. 

Exports of industrial supplies fell 9.8% on the month as weaker-than-expected Chinese data in recent months point to a slow domestic economic recovery after the reopening bump; China is the world’s largest oil importer. Industrial supplies exports fell 15.5% in April from twelve months earlier. U.S. crude oil output will likely decline further over the next few months weighing on the exports of industrial supplies. The count of oil drilling rigs operating in the U.S., an indicator of future output, is down around 7% this year. 

Exports of manufactured goods also fell on the month. Capital goods exports declined 0.8% from March and consumer goods exports fell 7.4%. Automotive exports fell 2.1% on the month but were up 7.6% on the year. The headwinds to the vehicle industry from labor shortages and supply chain issues are improving and this will support automotive exports in the near term. 

Imports rose in April from March in every category except food and beverage (down 2.7%) and capital goods (down 0.2%). Inventories were a big drag on U.S. GDP growth in the prior quarter as consumer spending remained resilient and businesses liquidated inventories. Inventory restocking should support imports in the near term although high interest rates and deteriorating sentiment will weigh on inventory investment in the second half of the year. 

Trade was neutral for U.S. economic growth in the prior quarter but will likely be modestly negative for growth in the second quarter as a weak Chinese economy, high inflation and tight financial conditions outside the U.S. weigh on exports and U.S. imports slightly improve with easing global supply-chain networks.

The PNC Financial Services Group, Inc. is one of the largest diversified financial services institutions in the United States, organized around its customers and communities for strong relationships and local delivery of retail and business banking including a full range of lending products; specialized services for corporations and government entities, including corporate banking, real estate finance, and asset-based lending; wealth management and asset management. For information about PNC, visit www.pnc.com.

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