How The Trade Deficit Got Better

According to a government report America's trade deficit narrowed down a bit, mainly driven by the drop in consumer spending on imports. Imports outstripped exports by $58.5 billion in April, down from the $62.4 billion in March.

To the surprize of analysts and economists the trade gap narrowed despite the rise in the price of oil imports. The 8% rise in the price of an oil price was partially balanced out by 3% drop in the consumption of it. Therefore the overall oil imports fell by more than $1 billion, helping the trade deficit.

Imports fell by 1.9%, due to slowdown in the U.S. economy and consumer spending. The weak dollar has made imported goods more expensive which lead to cut down of spending. The weak dollar has also made exports cheaper in other nations, making it more competitive. Another evident reason for slowdown in spending was that Walmart reported the worst sales comparison in its history in April.

In addition, exports edged up 0.2% to hit a record high once again. Export of services grew 0.5%, while export of goods was essentially flat, with food, feed and beverages being the category showing the best growth.

The government report also showed that America's trade gap with China continued to climb to $19.4 billion, up 12% from March and 13% from year-ago levels. The imbalance between the imports and exports with China now account for about a third of the overall trade deficit, and is nearly twice the size of the trade gap with oil producing nations.

(Source: CNN Money)