US trade deficit shrinks rapidly in April as inventory rebuilding slows

America's shortfall on trade with the rest of the world fell sharply last month as imports declined.

According to a preliminary estimate from the US Department of Commerce, in seasonally adjusted terms, America's deficit on its international trade in goods and services shrank by 15.9% to reach $105.9bn.

That was considerably less than the -$115.0bn deficit that economists had penciled-in.

Exports rose at a month-on-month pace of 3.1% to reach $173.9bn, but imports dropped by 5.0% to hit $279.9bn.

Ian Shepherdson, chief economist at Pantheon Macroeconomics, attributed the decline to a slowdown in inventory building after the sharp acceleration seen between November and March as retailers and wholesalers rebuilt their stockpiles.

Autos and apparel aside, especially the former, retail inventory-to-sales ratios in many sectors were now above their pre-Covid level.

"The April goods deficit is significantly lower than the $113.0B average for the second quarter, so at this point it is reasonable to assume that net foreign trade will made a hefty positive contribution to Q2 GDP growth, though it is unlikely to reverse the entire 3.2 percentage point hit to growth in the first quarter," Shepherdson added.

"Point forecasts so early in the data cycle for Q2 make little sense, given how erratic the numbers have been, but this is a good start."