Larger than expected and last month revised higher, indicating GDP was a bit lower than estimated, and weak sales matched with weak inventories don’t clear the shelves:
A key early indication on the strength of second-quarter GDP is not favorable as the nation’s goods deficit widened $2.5 billion in April to $67.6 billion. Exports of goods continue to show weakness, down 0.9 percent in the month to $125.9 billion that show sharp declines for vehicles and consumer goods. Imports of goods, which are a subtraction in the national accounts, rose 0.7 percent in the month with consumer goods and agriculture both rising.
Also released with this report are advance data on wholesale and retail inventories, both down 0.3 percent in the month and also negatives for GDP.
A widening trade deficit that includes a weakening in exports is a negative for the economy, pointing to currency outflow and soft global demand. In contrast, the draws in inventories, though negatives for GDP, are positives for the outlook, lowering the risk of unwanted overhang and pointing to the promise of having to rebuild stocks.
“My understanding is that the receipts currently are coming in a little bit slower than expected, and you may soon hear from Mr. Mnuchin regarding a change in the date,” Mulvaney said at a House Budget Committee hearing.