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U.S. trade gap hits $21B
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July 20, 1999: 3:05 p.m. ET
May record comes as exports fall first time in 5 months; GDP target may be cut
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NEW YORK (CNNfn) - The nation's trade deficit ballooned to a record $21.3 billion in May, the U.S. government said Tuesday, as the healthy American economy fed an appetite for global goods.
However, one analyst said the unexpectedly large surge in the trade gap could reduce targets for U.S. economic growth by sending more of its benefits to other countries instead of keeping them at home.
The trade deficit rose from $18.6 billion in April, which was revised down from the $18.9 billion first reported for that month, the Commerce Department said. The May gap was far wider than the $19.2 billion economists expected.
For the first time in five months, U.S. exports fell, dropping to $77.6 billion from $78.2 billion in April. Imports rose to $98.9 billion in May from $96.8 billion in April.
Behind the numbers was a sharp rise in imports from China and Mexico. One analyst said the report suggests that American economic strength may gradually take hold abroad.
"[The report] is a reflection of the strength in our economy," said Tony Crescenzi, chief bond market strategist at Miller Tabak. "It's good for all involved. We can export strength to reduce strain abroad."
U.S. growth rate likely to ease
The unexpectedly large trade deficit will cause economists' expectations for the nation's gross domestic product for the second quarter to decline, said Crescenzi. Current estimates are for a GDP of 3.3 percent, according to a Reuters poll.
"This is going to reduce the estimate on GDP by a half-[percentage] point," said Crescenzi. "This was the last piece of the puzzle on GDP."
GDP is affected by the trade deficit figures because when imports rise and exports fall, as in May, it signifies lower earnings for Americans from trade.
The second-quarter GDP number, scheduled for release July 29, will be closer to the 3 percent target that Federal Reserve Bank Chairman Alan Greenspan unveiled in mid-June, Crescenzi said.
Two weeks later the Fed surprised many market watchers by lifting interest rates a quarter-point and announcing a "neutral" bias about other rate moves soon.
"It looks like he has done it again, just when the market thought he had made potential policy error," said Crescenzi, referring to Greenspan.
In May, U.S. imports from Mexico rose 29 percent from April to $2.2 billion, while imports from China rose 10 percent to $5.3 billion. But the trade deficit with Japan fell to $5.3 billion in May from $5.6 billion in April.
As is common, the United States continued to export more services, while importing more goods. The trade deficit is the value of imports of goods and services minus the value of exports.
In May, the goods deficit rose by $2.9 billion to $28.2 billion, while the services surplus rose $0.1 billion to $6.9 billion.
The nation imported more automotive parts and vehicles, industrial supplies and capital goods, and sold fewer consumer goods and auto parts abroad. Services exports were virtually unchanged. 
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