WASHINGTON: The US trade deficit shrank in May as American exports hit their highest level in two years, the Commerce Department reported Thursday.
But analysts also said despite the jump in May, exports were still down for the second quarter, which could weigh on economic growth.
The narrowing deficit, which followed two straight increases, came despite a yawning imbalance with Mexico, which was at its highest for nearly a decade.
President Donald Trump’s administration is due next month to begin talks to renegotiate the North American Free Trade Agreement with Mexico and Canada.
The trade gap fell 2.3 percent compared to April to $46.5 billion. Analysts had expected a bigger drop of three percent.
Exports rose 0.4 percent to $192 billion in May, the highest since April 2015. Imports fell 0.1 percent to $238.5 billion.
Exports to South Korea were at their highest ever, at $4.5 billion while exports to Brazil were $3.3 billion, a level not seen in almost three years.
The US also imported more oil in May than it has in nearly five years, at 265 million barrels.
The overall deficit with Mexico was $7.3 billion, while the deficit in goods with China, which the White House has targeted with accusations of unfair trade, fell 6.2 percent to $30.1 billion.
Despite the decline in May, the overall deficit year-to-date is still up 13 percent over the first five months of last year.
Services trade also boomed in the month, with exports and imports at their highest levels on record at $64.8 billion and $43.8 billion, respectively.
Ian Shepherdson of Pantheon Macroeconomics said, excluding oil and aircraft, the numbers pointed to a four percent decline at an annual rate in goods exports for the April-June period, which was likely to be a drag on growth.
“Trade is a bust for second quarter GDP,” he said.
However, he noted that manufacturing surveys have pointed to stronger exports in the third quarter.