The U.S. trade deficit in goods and services widened sharply in April to a six-month high, according to data from the U.S. Census Bureau. It widened by $14.0 billion to $74.6 billion in April from $60.6 billion in March. This was better than the consensus expectation for a widening to $75.8 billion. Total exports fell 3.6% in April from the prior month while imports rose 1.5%. 

Exports of industrial supplies fell 9.4% on the month as disappointing Chinese economic data in recent months point to a slow domestic economic recovery after the reopening bump. Exports of industrial supplies were down 16.1% in April from twelve months earlier. Exports of consumer goods fell 7.6% in April from the prior month while automotive exports were down 0.2%. 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. Exports of services rose 0.2% on the month and 6.4% from a year ago. 

Imports rose in April from March in every category except food and beverage (down 2.6%). Inventories were a big drag on U.S. GDP growth in the prior quarter as consumer spending remained resilient and businesses drew down inventories. Strong inventory restocking should support GDP growth in the current quarter. 

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

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