WASHINGTON—The U.S. trade deficit in goods narrowed in May as exports increased strongly, suggesting that trade could contribute to economic growth in the second quarter for the first time in nearly two years.
The report from the Commerce Department on Tuesday also showed solid increases in wholesale and retail inventories. While those gains, combined with a decline in goods imports, should provide a boost to gross domestic product growth this quarter, it also potentially signals slowing domestic demand.
The economy is on recession watch as the Federal Reserve aggressively tightens monetary policy to tackle high inflation.
“Exports and inventories are still rising in May at least, and this means the recession clouds offshore will have to sit on the horizon for another month,” said Christopher Rupkey, chief economist at FWDBONDS in New York….