- Millan Mulraine, economist at TD Securities
Previously it was expected that the U.S. trade balance would increase marginally from –$44.66 billion recorded in May to -$44.7 billion. However, the Commerce Department reported the opposite, as trade deficit narrowed in June amid petroleum imports, which fell to the lowest level in more than three years, adding to signs that trade affected second quarter growth less than initially estimated. A lower deficit may spur economic expansion as it point to the fact that Americans buy more U.S.-produced goods compared to overseas products. Overall, trade deducted 0.61 percentage point from GDP in the three months through June, when the economy grew at the 4.0% pace, following the 2.1% contraction in the first quarter. In the January-March period trade deficit slowed growth by 1.7 percentage points.
The trade gap shrank 7% to a seasonally adjusted -$41.5 billion, the fastest decline since November 2013 and the lowest reading since January. U.S. exports rose as much as 0.1% to a record high of $195.9 billion, whereas imports dropped 1.2% to $237.4 billion, the steepest fall in a year. The biggest contribution to the shrinking trade gap was made by imports of petroleum products, which declined to $27.4 billion from $28.3 billion in May. U.S. energy boom has allowed the country to reduce its reliance on foreign oil, easing pressure on the current account deficit.
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