US: Real trade deficit narrowed considerably in April – Wells Fargo

Data released on Tuesday showed a reduction in April in the trade deficit from a record figure in March. Analysts at Wells Fargo, point out that real net exports were a significant drag on the headline rate of GDP growth in the first quarter, they look for them to make a modestly positive contribution to overall GDP growth in the second quarter.

Key Quotes: 

“The U.S. deficit in international trade in goods and services, which plunged to an all-time record of $107.7 billion in March, rebounded to "only" $87.1 billion in April. The international trade data have been unusually volatile in recent months due to the distortions of the lingering pandemic and supply chain bottlenecks.”

“The GDP data for the first quarter showed that real exports of goods and services declined at an annualized rate of 5.4% while real imports jumped 18.3%. Consequently, real net exports sliced 3.2 percentage points from the headline GDP growth rate. Indeed, the 1.5% drop in real GDP in Q1 was due in large part to this marked deterioration in real net exports. Today's data showed that the real trade deficit narrowed considerably in April from its nosedive in March and has more or less returned to its level in the first two months of the year.·

“We look for real net exports to make a modest positive contribution to overall GDP growth in the second quarter. Indeed, we do not expect the negative GDP growth print in Q1 to be repeated in Q2-2022.”