By Lucia Mutikani
WASHINGTON (Reuters) -The U.S. trade deficit in goods narrowed to the lowest level in nearly two years in June as imports fell sharply, cementing economists’ expectations that trade likely accounted for much of an anticipated rebound in economic growth in the second quarter.
While the unexpected contraction reported by the Commerce Department on Tuesday could prompt economists to upgrade their gross domestic product estimates for last quarter, the steep decline in imports flagged slowing domestic demand.
Imports surged in the first quarter as businesses rushed to beat higher prices from President Donald Trump’s sweeping tariffs on foreign merchandise, contributing to the first decline in GDP in three years. The Trump administration has announced a number of trade deals which economists said could help to ease uncertainty.
“This lends upside risk for our (GDP) forecast,” said Matthew Martin, a senior U.S. economist at Oxford Economics. “As trade policy uncertainty eases, imports and exports may begin to find their troughs in the second half of the year and become less volatile.”
The goods trade gap narrowed 10.8% to $86.0 billion last month, the lowest level since September 2023, the Commerce Department’s Census Bureau said. Economists polled by Reuters had forecast the goods trade deficit would rise to $98.20 billion.
Imports of goods decreased $11.5 billion, or 4.2%, to $264.2 billion, the lowest level since March 2024. The decline was led by a 12.4% plunge in consumer goods imports.
Industrial supplies imports, which include crude oil and non-monetary gold, slumped 5.5%. Imports of foods, feeds and beverages fell 1.1%, while those of motor vehicles decreased 2.0%. But capital goods imports rose 0.6%.
Goods exports slipped $1.1 billion, or 0.6%, to $178.2 billion. They were held back by an 8.1% drop in exports of industrial supplies. But exports of capital goods shot up 4.7%, while shipments of foods, feeds and beverages increased 4.0%. Shipments of consumer goods advanced 1.5%.
The government is scheduled to publish its advance estimate of second-quarter GDP on Wednesday. A Reuters survey of economists forecasts that GDP rebounded at a 2.4% rate in the April-June period after contracting at a 0.5% in the first three months of this year.
Though a reversal is expected in the trade deficit after it sliced off a record 4.61 percentage points from GDP in the first quarter, some of the boost to growth was likely partially offset by businesses drawing down on some of the imports, which had landed in warehouses as inventory.
The Census Bureau report also showed wholesale inventories increased 0.2% in June after declining by 0.3% in May.
Stocks at retailers rose 0.3%, matching May’s gain. They were driven by a 0.9% increase in motor vehicle stocks. Excluding motor vehicles, retail inventories were unchanged. This component goes into the GDP calculation.
(Reporting by Lucia Mutikani; Editing by Chizu Nomiyama and Paul Simao)
