The US trade gap shrank in May to its lowest level since January last year as service industry exports hit records and imports dropped for a second straight month, the US government said yesterday.

The news bodes well for second-quarter GDP and, coupled with a larger-than expected rise in the leading economic indicator index for June, was welcome amid less rosy manufacturing data from the Federal Reserve Bank of Philadelphia and a mixed jobless claims report.

The unexpected fall in imports came against a backdrop of growing complaints from US business, labour and farm groups about the strength of the US dollar against other major currencies, which they say hurts US exports.

See also Story of the Week, page 3.