WASHINGTON (Reuters)

The United States’ trade deficit narrowed more than expected in July as imports declined likely because of shortages and a shift in domestic spending from goods to services.

The Commerce Department said on Thursday (September 2) that the trade gap fell 4.3 per cent to US$70.1 billion. Data for June was revised to show the deficit at $73.2 billion instead of $75.7 billion as previously reported.

Economists polled by Reuters had forecast a $71.0 billion deficit. Imports slipped 0.2 per cent to $282.9 billion. Goods imports dropped 1.2 per cent to $236.3 billion, likely restrained supply constraints.

Demand is also rotating to services from goods amid vaccinations against the coronavirus (COVID-19).

Exports increased 1.3 per cent to $212.8 billion in July. Goods exports shot up 1.8 per cent to $148.6 billion.

If sustained, the narrowing trade deficit could see trade contributing to gross domestic product growth in the third quarter after being a drag on GDP for four straight quarters.

But, with businesses desperate to rebuild inventories, which were depleted in the first half of the year, July’s decline in goods imports could be temporary.

Growth estimates for the third quarter are converging around a five per cent annualised rate. The economy grew at a 6.6 per cent pace in the second quarter.