The May Trade Balance Report showed a narrowing in the trade deficit to $69.0 billion (consensus -$69.0 billion) from an upwardly revised $74.4 billion (from -$74.6 billion) in April. The deficit moved in a positive direction, but not because of any overwhelming strength in exports. On the contrary, exports were $2.1 billion less than April exports. The swing factor was that imports were $7.5 billion less than April imports.
The key takeaway from the report is that the decline in exports and imports is emblematic of a softening in global demand that one would expect to see in an environment where many of the world’s leading central banks are raising rates.