The U.S. goods trade deficit narrowed in June, according to preliminary government data released Wednesday. Imports fell faster than exports, shrinking the gap between what the country buys from abroad and what it sells.
Imports Lead the Decline
The drop in imports was the main driver behind the narrower deficit. Exports also declined, but not as steeply. The data, which covers goods only and excludes services, offers an early snapshot of trade flows for the month.
What the Data Signals
A shrinking goods trade deficit can reflect weaker domestic demand, as businesses and consumers buy fewer foreign-made products. It can also result from stronger overseas sales. The June figures come as the Federal Reserve continues to weigh interest rate policy against inflation and economic growth.
Economists watch the trade balance closely because it feeds into gross domestic product calculations. A narrower deficit typically adds to GDP, all else equal.
The Commerce Department will release the full June trade report, including services and revised goods figures, later this summer. That report will provide a more complete picture of U.S. trade in the second quarter.
