US trade deficit shrinks in April even as exports drop

The US trade deficit shrank in April as a dramatic fall in imports offset the first decline in exports for five months.

Exports saw their first fall since November as the deepening crisis in the eurozone hit demand for goods.

US imports, however, also shrank dramatically due to weak domestic demand meaning the trade deficit overall fell 4.9% to $50.1bn (£32.5bn).

The deepening eurozone debt crisis exacerbated the gap.

Exports to Europe were down 11.1% in April. The region accounts for almost a fifth of US exports.

The US trade deficit, the difference between imports and exports, is now at $603bn for the year, already 7.7% higher than last year's total imbalance.

Exports of everything from commercial planes to industrial machinery fell.

A widening trade gap slows growth as it means the US is spending more on products made abroad than it is making on sales of domestically manufactured goods.

The trade data follows on from a raft of other weak US data, including flat service sector growth last month and the creation of fewer than expected jobs.

Meanwhile, US growth for the first quarter was last week downgraded to 1.9%.

"With the eurozone crisis set to rumble on for some time yet, US exports to the eurozone are only likely to fall further," said Paul Dales, senior US economist at Capital Economics.

"The upshot is that net trade is unlikely to add much to GDP growth this year and may even subtract from it," he said.