The gain in U.S. imports in May points to a pickup in business and consumer spending that indicates the U.S. economy last quarter was the healthiest in four years, according to economists at Morgan Stanley. The value of goods bought from abroad climbed by $5.5 billion in May, the biggest gain so far this year, to $194.5 billion, figures from the Commerce Department showed today in Washington. Excluding a drop in demand for foreign petroleum, the increase was an even larger $7.6 billion, the biggest advance since comparable records began in 2000.
The gain in imports exceeded the rise in exports, pushing the deficit with the rest of the world to the highest level in 18 months. Because overseas purchases of machinery and equipment contribute to economic growth, they offset some of the drag on gross domestic product associated with a wider trade deficit.
“With much of the upside surprise in imports in a surge in capital goods, the outlook for domestic investment looks even stronger,” David Greenlaw and Ted Wieseman, Morgan Stanley economists in New York, said in a note to clients.
The value of imports was $42.3 billion larger than that of exports, the biggest deficit since November 2008. The median forecast of economists surveyed by Bloomberg News called for the gap to narrow to $39 billion from April’s $40.3 billion.
The bigger-than-projected trade gap prompted Greenlaw and Wieseman to lower their estimate of second-quarter U.S. economic growth to a 3.6 percent annual pace from 4 percent.
Excluding Trade
The pickup in business investment meant the world’s largest economy probably grew at a 4.4 percent rate excluding trade and inventories, more than they previously projected and the best performance by that measure since the first quarter of 2006.
American companies bought 5.5 percent more capital goods in May, the biggest gain since March 2006, today’s report showed. The increase was led by growing demand for computers, drilling equipment, industrial machines and engines.
Greenlaw and Wieseman bumped up their second-quarter forecast for the increase in business spending on equipment and software to 21 percent at an annual rate from 18 percent, which would make it best biggest gain since the first three months of 1998.
Purchases of foreign-made consumer goods climbed by $2.62 billion in May and auto demand increased by $2.22 billion, according to today’s report, showing little letup in the consumer spending that accounts for about 70 percent of the U.S. economy.
