The US trade deficit shrunk in May to the lowest level of the year, reflecting a pickup in exports of goods and services.

The gap narrowed $1.1 billion, or 1.3% from a month earlier, to $85.5 billion, Commerce Department data showed Thursday. The median estimate in a Bloomberg survey of economists called for an almost $85 billion deficit. The figures aren’t adjusted for inflation.

The value of goods and services exports increased 1.2% to a record $255.9 billion while imports rose 0.6% to $341.4 billion.

A trade gap that’s narrowed in consecutive months may help provide a lift to second-quarter gross domestic product. In the first quarter, a surge in the deficit subtracted 3.2 percentage points from GDP in the first quarter—one of the largest negative impacts on record.

On an inflation-adjusted basis, the May merchandise-trade deficit was little changed at $116.6 billion. In March, the gap was $135.5 billion.

The increase in exports reflected a record value of merchandise shipped abroad. Exports of industrial supplies, including oil and petroleum products, and consumer goods increased in May.

The US merchandise trade deficit with China widened in May to $31.5 billion on an unadjusted basis, and imports from the country rose 5% to $43.9 billion.

Decades-high inflation is expected to weigh on demand for merchandise globally, which could curb two-way trade activity. Nonetheless, cargo orders arriving at West Coast ports continue to rise, suggesting imports—which are still above pre-pandemic levels—will remain elevated in the coming months as merchants prepare for the holiday shopping season.

Digging Deeper

  • The nominal merchandise-trade deficit narrowed to $105 billion
  • Travel exports—or spending by visitors to the US—fell to $10.6 billion, the first decline since January
  • Travel imports, a measure of Americans traveling abroad, climbed to $9.4 billion, the highest since before the pandemic