The US merchandise-trade deficit shrank in June by more than forecast, as the shortfall in goods trade narrowed 10.8 per cent to US$86 billion from the prior month. 

Data released on Wednesday by the US Department of Commerce shows imports of goods declining by US$11.5 billion, or 4.2 per cent to US$264.2 billion, the lowest level since March 2024. The decline was led by a 12.4 per cent plunge in consumer goods imports, due to a contraction in shipments of consumer goods to the lowest since September 2020.

At the same time, US merchandise exports plummeted 0.6 per cent. The figure, which isn’t adjusted for inflation, was lower than all forecasts in a Bloomberg survey of economists.  Goods exports slipped US$1.1 billion, or 0.6 per cent, to US$178.2 billion. 

Exports were held back

They were held back by an 8.1 per cent drop in exports of industrial supplies, but exports of capital goods shot up 4.7 per cent, while shipments of foods, feeds and beverages rose 4.0 per cent. Shipments of consumer goods climbed 1.5 per cent.

Industrial supplies imports, which include crude oil and non-monetary gold, slumped 5.5 per cent. Imports of foods, feeds and beverages fell 1.1 per cent, while those of motor vehicles decreased 2.0 per cent. But capital goods imports rose 0.6 per cent.

The government is scheduled to publish its advance estimate of second-quarter GDP today (July 31). A Reuters survey of economists forecasts that GDP rebounded at a 2.4 per cent rate in the April-June period after contracting at a 0.5 per cent in the first three months of this year.

The Fed’s interest rate decision, a string of big tech earnings and some key indicators on the state of the economy. 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 per cent in June after declining by 0.3 per cent in May. Stocks at retailers rose 0.3 per cent, matching May’s gain. They were driven by a 0.9 per cent increase in motor vehicle stocks. Excluding motor vehicles, retail inventories were unchanged. This component goes into the GDP calculation.