US Goods Trade Deficit Shrinks; Likely Boost to Second-Quarter GDP

• 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 prompted economists to upgrade their gross domestic product estimates for the last quarter, the steep decline in imports flagged slowing domestic demand against the backdrop of a softening labour market.
• That was reinforced by other data showing a decrease in job openings and hiring in June, as well as deterioration in consumers' perceptions of current employment availability. The reports dovetailed with the high number of people receiving unemployment checks.
• Economists say trade policy uncertainty, especially as to where President Donald Trump's tariff levels will eventually settle, has created an environment that is not conducive for businesses to make long-term plans. Imports surged in the first quarter as businesses rushed to beat higher prices ahead of the duties, contributing to the first decline in GDP in three years.
• The Trump administration has announced several trade deals, which economists said could help to ease the uncertainty. "The data suggest the second-quarter GDP report will have a solid headline, but weak details," said Bill Adams, chief economist at Comerica Bank. "The economy was on uneven, wobbly footing in the second quarter."
• The government is scheduled to publish its advance estimate of second-quarter GDP on Wednesday. A Reuters survey of economists, conducted before the release of the trade data, forecast that GDP rebounded at a 2.4% rate in the April-June period after contracting at a 0.5% pace in the first three months of this year.

S(Source: Reuters)