U.S. trade deficit fell to $48.7 billion in May

Aided by cheaper oil that lowered imports and increased American exports to Europe and China, the U.S. trade deficit narrowed in May to $48.7 billion, down from $50.6 billion in April. That’s a 3.8% dip, according to a Commerce Department report out this morning. But economists caution that the decrease isn’t enough to alter weak growth forecasts for the April-June quarter. U.S. manufacturing has weakened this spring, hurt by Europe’s financial crisis and slower growth in China. And sluggish U.S. job growth and meager pay increases have made American consumers more cautious about spending, which drives roughly 70% of economic activity. A 0.2% increase in exports in May—to $183.1 billion, the second-highest level on record—is a hopeful sign. Nonetheless, Paul Ashworth, chief U.S. economist at Capital Economics, doesn’t see growth picking up from the January-March’s tepid 1.9% annual pace. He’s predicting annual growth of between 1.5% and 2% in the April-June quarter. Lower oil prices, which have been spurring increased exports, constitute the main reason for the narrowing of the trade deficit in May. Through the first five months of this year, exports are up 5.7% from the same month a year ago. And exports to the struggling 27-nation European Union rose 2.6% in May from April. But the U.S. deficit with the EU widened 21% in May to $10.5 billion because imports from Europe also increased 7.8%. The Associated Press has more figures from today’s report and the full story here.