New federal data out Wednesday shows the U.S. economy may be growing faster than economists expected, as Americans bought fewer foreign goods in June, like oil, cars and cell phones, and sold slightly more goods overseas, like civilian airplanes and pharmaceutical products.
The U.S. trade deficit, the dollar amount by which imports’ value exceeds exports’ value and essentially what the country borrows to finance its purchases, shrank 7 percent to $41.5 billion, the smallest deficit since January, from May’s $44.7 billion. Sixty-six economists polled by Bloomberg had predicted a deficit of $44.8 billion.
This “means that second-quarter GDP growth, which was initially estimated to be 4 percent annualized, will be revised even higher, probably to about 4.2 percent,” Paul Ashworth, chief U.S. economist for Capital Economics, wrote in a note Wednesday.
Patrick Newport, U.S. economist for IHS Global Insight, said second-quarter GDP growth would be revised up 0.4-0.5 percent. The Bureau of Economic Analysis estimated last week that the country’s economic output grew at 4 percent from April to June, based on incomplete data subject to revision.
The 1.2 percent drop in imports from May to June is the biggest in a year, with petroleum imports the lowest in more than three years as Texas, North Dakota and other oil-producing states continue pumping increasing amounts of shale oil. American car sales, too, improved this summer, reaching an eight-year high in June. The decline in imports is a drop back after an unusually big surge in March and April, but surveys of factories and businesses show strengthening domestic demand, Ashworth said.
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“We aren’t worried that the decline in imports reflects a weakening in spending at home,” he said.
Imports would have been even lower and exports higher if not for a 2.2 percent rise in food imports as a harsh winter nationally and a drought in the Southwest has upset farms. Exports edged up by 0.1 percent over the month, reflecting weak foreign demand for American products as the European economy sputters.
“Exports should continue to grow, but the evident strength in domestic demand suggests that the gain in imports will be even more rapid,” Ashworth said.
The trade balance also narrowed in May more than expected, to $44.4 billion from $47 billion in April. Exports rebounded by 1 percent in May after slipping 0.1 percent in April, while imports fell 0.3 percent in May after a 1.1 percent climb in April.