The US trade deficit narrowed in April on slowing global demand, with both imports and exports dropping from record high levels set in March as Europe's slumping economy appeared to take a toll, a government report showed.

The gap shrank 4.9 per cent to $50.1 billion, as imports of goods and services dropped 1.7 per cent to $233bn, the US Commerce Department said on Friday.

Exports slipped 0.8 per cent to $182.9bn. Both imports and exports were still the second highest on record.

Wall Streets analysts surveyed before the report had expected a slightly smaller trade gap of $49.5bn.

US exports to the European Union, which is teetering on the edge of recession stemming from a prolonged debt crisis, fell 11.1 per cent in April to $22.3bn.

A narrower trade gap is positive for US economic growth because it suggests a greater share of domestic demand is being met by producers in the US.

At the same time, the drop in exports raises the prospect of slower foreign demand to propel economic growth.

A second Commerce Department report showed US wholesale inventories rose more than expected in April.

Total wholesale inventories increased 0.6 per cent to a record $483.5bn, after an unrevised 0.3pc gain in March, the department said.

The component only added 0.21 percentage points of GDP in the first quarter, but yesterday's report suggests it could be a bigger factor in the second. Economists see GDP advancing about two per cent in the second quarter on an annualised basis after a 1.9pc increase in the first three months of the year.

Some economists tweaked their forecasts for second-quarter GDP growth after the data, with the slightly wider-than-expected trade gap in April detracting from growth estimates, but inventories adding a bit.

The EU collectively was the US' second largest export market last year.-Reuters