US trade deficit contracted more than forecasted in June after petroleum imports fell to the lowest level in 3 ½ years, indicating that trade didn’t weigh on economic growth in the second quarter as previously thought.
The Commerce Department reported on Wednesday that the trade shortfall narrowed 7.0 percent to $41.5 billion. This is much lower than the nearly $44.8 billion initially estimated when the government released the first second-quarter GDP report last week.
“The improvement in June could mean a modest upward revision to the second-quarter GDP estimate,” Millan Mulraine, New York-based deputy chief economist at TD Securities, told Reuters. “It also implies a fairly strong hand-off to third-quarter GDP.”
The deficit, when inflation is adjusted, shrank to $48.8 billion compared to $52.0 billion in May. This prompted economists to estimate that GDP grew by an extra 0.3 percentage point in the April-June quarter. The analysts had forecasted June’s trade deficit to hit $44.7 billion, up from $44.4 billion in May.
Imports declined 1.2 percent in June, the most in a year, to $237.4 billion while petroleum imports plunged to $27.4 billion, the weakest level since November 2010. This compares with $28.3 billion in May. US has gradually reduced its reliance on oil imports as domestic production reached new heights due to the use of a technique known as fracking to extract shale oil and gas resources. The petroleum deficit plunged to new lows last seen in May 2009 in June.
Non-petroleum imports declined to $167.6 billion from May’s $169.6 billion, indicating that businesses accumulated inventories much slowly. Exports rose 0.1 percent to an all-time high of $195.9 billion in June, as deliveries of automobiles, engines and parts grew to a record high. To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.
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