US DATA: Notably Soft Exports, Capital Goods Import Trend Remains Strong (2/2)

The surprise jump in the trade deficit in May was driven by a large drop in export values in May. It's possible that this was helped in particular by another drop in gold exports but it was a broader-based decline after some recent strength - we'll have to wait until the full release to know for sure. Imports meanwhile showed further strength in a positive sign for domestic demand, albeit with capital goods imports broadly stabilizing after a string of strong increases on extremely strong demand for computer and broader tech-related products. 

• The surprise jump in the goods deficit was driven by a sharp drop in exports (-5.4% M/M vs cons 2.1) for its largest decline since Nov 2025 and before that Apr 2020. There is an important caveat though that this is after four strong months with a cumulative 22% increase.
• There were heavy pull backs in the three largest categories after recent strength, although the advance nature of the release limits what conclusions we can draw from this update.  
  • Industrial supplies slipped -7.0% M/M after 2.9% ($82.7bn). This category includes both petroleum and non-monetary gold, with scope that gold drove some of the drop with spot prices slipping circa -3% on the month along with also a 3% drop in Comex inventories that can show up as a larger decline in export volumes.
  • Capital goods slipped -5.0% M/M after 6.1% ($66.8bn) on what had been computer-based strength in April.
  • Consumer goods slipped -9.2% M/M after 7.9% ($20.7bn).
• Imports on the other hand were stronger than expected in May as they increased 3.6% M/M (sa, cons 2.1%) after 2.0% in April.
• Most categories saw strong increases although the large capital goods category underperformed with 0.4% M/M after a long run of strong increases including a 5.8% rise in April ($127.5bn).
• That includes consumer goods at 5.7% M/M after -0.5% ($59.5bn) and industrial supplies with 4.8% after -1.7% ($55.9bn).  
• In trend terms, import growth (15% Y/Y, strongest since Mar 2025) continues to have been driven by the sustained surge in capital goods items which set a new recent high of 42% Y/Y in May.
• Y/Y changes are of course susceptible to base effects from the tariff front-running seen early in 2025, and indeed industrial supplies has recovered to 11.7% Y/Y from a low of -45.5% Y/Y in Jan 2026 (knocked around by gold shipments) whilst consumer goods is still at -9.1% Y/Y vs a low of -44% Y/Y in Mar 2026 (pharmaceutical products).