U.S. Trade Deficit Unexpectedly Narrows To $41.5 Billion In June

(RTTNews) - With the value of imports showing a significant decrease, the Commerce Department released a report on Wednesday showing that the U.S. trade deficit unexpectedly narrowed in the month of June.

The report said the U.S. trade deficit narrowed to $41.5 billion in June from a revised $44.7 billion in May. Economists had expected the deficit to widen to $45.0 billion from the $44.4 billion originally reported for the previous month.

Economists noted that the unexpectedly narrower trade deficit could lead to an upward revision to the pace of GDP growth reported for the second quarter.

The narrower trade deficit reflected a 1.2 percent decrease in the value of imports, which fell to $237.4 billion in June from $240.3 billion in May.

Petroleum imports fell to their lowest level in almost four years, while imports of auto parts and consumer goods also showed significant decreases.

At the same time, the drop in imports was partly offset by a 2.2 percent jump in imports of food, feeds and beverages.

Paul Ashworth, Chief U.S. Economist at Capital Economics, said, "The decline in imports in June is a drop back after what always looked like an unusually big surge in imports in March and April."

"With the various activity surveys pointing to a strengthening in domestic demand, we aren't worried that the decline in imports reflects a weakening in spending at home," he added.

The report also showed a slight uptick in the value of exports, which inched up 0.1 percent to $195.9 billion in June from $195.6 billion in May.

The Commerce Department said the modest increase in the value of exports reflected increases in exports of consumer goods and services. A drop in exports of food limited the upside.

"Overall, we expect the trade deficit to widen modestly over the second half of this year," Ashworth said. "Exports should continue to grow, but the evident strength in domestic demand suggests that the gain in imports will be even more rapid."

The Commerce Department noted that the goods deficit narrowed to $60.3 billion in June from $63.3 billion in May, while the services surplus ticked up to $18.7 billion from $18.6 billion.

Meanwhile, the report also showed that the U.S. trade deficit with China widened to $30.1 billion in June from $28.8 billion in the previous month.